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After Nearly Half A Century, Iran’s Gas Investment in the UK Pays Huge Dividends

April 21, 2022

In the aftermath of the oil shock of 1973, Iran's oil revenue suddenly quadrupled to nearly $20 billion a year (equivalent to $130 billion in today’s money). Flushed with new petro-dollars, Iran’s then-leader, Mohammad Reza Shah Pahlavi, immediately went on a spending spree to build Iran's economic, industrial, and military capabilities. As part of a new foreign investment strategy, the Iranain government began acquiring large stakes in oil and gas assets in strategic locations such as South Africa, South Korea, and the United Kingdom.

One of Shah’s major investments was in the UK North Sea, where the National Iranian Oil Company (NIOC) worked alongside British Petroleum (BP). The 50-50 joint venture paid off in 1977 when a sizable gas condensate field was discovered.

This field, more commonly known as Rhum, is located about 400 km off the coast of Aberdeen, a city in northeast Scotland. The Rhum field was considered a challenging development at the time as it was a high-pressure and high-temperature reservoir. It started production in 2005, after numerous delays in construction. In 2010, BP, however, decided to cease production at Rhum field because of international sanctions against Iran’s nuclear program.

In 2018, BP sold its share of the field to Serica Energy. In 2019, Serica brought Rhum back into production and it is now Serica’s biggest producing asset. During President Donald Trump's administration, the United States left the Iran nuclear deal and applied maximum pressure against Iran. In order to produce gas and simultaneously comply with US sanctions, Serica and the Iranian Government agreed to hold Iran’s share of the revenue from Rhum in a blocked account until sanctions are lifted.

Rhum’s production rates, which is reported by the UK government in terms of barrels of oil equivalent per day (boepd), are rising and according to Serica is expected to get even higher in 2022 (see Figure 1). 


Figure 1

Simultaneously, oil & gas prices have been rising rapidly across Europe, which has benefited Rhum. UK’s wholesale gas prices indicate a five-fold increase in the past 12 months. It is a trend that is expected to hold for the next year or so as the war between Russia and Ukraine rages on and supply of natural gas from Russia is under threat. (See Figure 2)



Figure 2

In June 2021, Serica estimated that a new well completed in the Rhum field could yield around £350,000 per day of gross revenue. Using the current gas prices, this would translate to around £1.2 million per day for just one well (around 42 billion Tooman per day). So, fifty years on, we can see the benefits of a long term investment.