UK-Dutch oil major Shell is struggling to pay off money owed to Iran for crude oil due to US and EU sanctions restricting payments.

The oil major reportedly owes around $1bn to state-owned National Iranian Oil Company (NIOC) for deliveries of crude, Reuters news agency reports.

Shell has declined to comment on the issue.

The EU bolstered financial sanctions against Iran in January, placing a ban on the country’s oil exports with effect from July.

Shell is Iran’s second largest private buyer, taking approximately 100,000 barrels a day (b/d). Since it is now almost impossible to use the international banking system to pay Iran, the company could be forced to ask the UK government to help settle the account.

Shell has no upstream or downstream operations in Iran, but in 2002 signed an initial agreement with NIOC, along with Spain’s Repsol, for the development of phases 13 and 14 of the South Pars field.

The project would be integrated with the Persian LNG project, which aims to build two liquefied natural gas (LNG) trains producing around 16.2 million tonnes a year for export. After eight years of drawn out talks and no decision from the European oil majors, NIOC opted to remove the partners from the scheme in May 2010.