Iran and Shell signed a deal on December 7 to explore the development of three of Iran's biggest oil and gas fields, undeterred by U.S. President-elect Donald Trump's vow to undo last year's nuclear deal that enabled Western companies to resume business with Iran.
Anglo-Dutch Shell is the largest oil company to wade back into Iran since the nuclear deal was signed. It follows France's Total, which last month signed a $4.8 billion deal to explore developing a large offshore gas field.
The latest deal opens the way for Shell to assess the production potential of the South Azadegan and Yadavaran oil fields, both in southwestern Iran near the Iraqi border, as well as an offshore gas field near Kish Island in the Gulf.
The two oil fields are among the largest oil discoveries of the past 20 years. Iran estimates the South Azadegan field could become its biggest producer and by itself is worth about $10 billion.
Shell faces stiff competition. China's Sinopec oil firm already is drilling in the Yadavaran field and Total has shown an interest in developing the Azadegan field.
“We’re happy to resume working in Iran,” said Shell Vice President Hans Nijkamp. He said the deal "opens a new chapter" for Iran and Shell, which halted most of its activities in Iran in 2010 under an international sanctions regime that was lifted in January under the nuclear deal.
"International [oil] markets remain under pressure, but the Islamic republic's return brings stability for the world's energy provision as well as the country's economic health," he said at the signing ceremony.
Shell, Total, and other Western oil companies face risks in Iran if Trump makes good on his vows to renegotiate or pull out of the nuclear deal, which provided sanctions relief in exchange for Iran curbing its nuclear activities.
Trump has not been shy about publicly confronting corporations that make moves he disagrees with, having taken to task just this week U.S. aircraft giant Boeing and Carrier, a major U.S. air-conditioner manufacturer.
Shell has said it would proceed with caution as it mulls reentering Iran under the preliminary agreement it signed with the National Iranian Oil Co.
While the recruitment of Shell to help develop Iran's vast energy resources represents a victory for Iranian President Hassan Rohani in his standoff with Trump, his efforts to attract foreign firms for major energy projects has caused some controversy at home in Iran, as well.
When the tenders were first announced in October, a senior commander in the Islamic Revolutionary Guards Corps, which has extensive economic interests in the energy sector, said it was a "disgrace" for Iranian firms to be subordinated to foreigners in the proposed contracts.
But the Iranian Oil Ministry has insisted that foreign capital and know-how will be needed to expand the country's energy sector after decades of underinvestment due to sanctions.