Sheer Energy says an initiative by Californian congressman Tom Lantos aiming to punish the Canadian firm for dealing with Iran would not have any implications on its commitments. 'ILSA [the Iran Libya Sanctions Act] is their [the US'] business and their legislation,' says a representative of Sheer Energy. 'Our position is that everything is legal under Canadian and Iranian law and that there is no need for sanctions.'

Lantos on 4 June introduced a congressional resolution demanding that Sheer Energy cancel 'its contract with the Government of Iran, a state sponsor of international terrorism, to develop Iranian oil fields' and urged the US president to impose sanctions on Sheer Energy under ILSA.

ILSA seeks to punish foreign companies that invest more than $20 million in the energy sector of Iran or Libya.

'The question that has to be asked is whether investment would be subjected to ILSA on annual or total project cost,' says the Sheer representative. Under the four-year buy-back service contract with National Iranian Oil Company (NIOC), Sheer has a 49 per cent stake in the $88 million project, with the local Naftgaran Engineering Services Companyholding the remainder. Accordingly, Sheer Energy's annual investment will amount to about $10 million.

If actions were taken against the Canadian firm, it would be the first time that a foreign oil company active in Iran would be subjected to sanctions. European oil majors such as France's TotalFinaElfand Italy's Eniare involved in larger schemes in the Islamic republic, but no sanctions have been imposed in the past.

' Petro-Canada is also active in Iran but no action has been taken,' says the representative. 'It seems they [the US] need a scapegoat now.'

The representative says that the worst outcome of an embargo against Sheer Energy would be a travel ban on the company's employees to its southern neighbour since the oil firm has no assets in the US.

The US State Department has yet to determine whether Sheer Energy's deal violates US legislation.

Sheer Energy's project calls for production levels at the Masjid-e Soleiman field, which is located in Khuzestan province, 90 kilometres north of Ahwaz, to be increased to 25,000 barrels a day (b/d) of oil from NIOC's current production level of about 5,000 b/d.