Firms Reported to Have Commercial Activity in the Iranian Energy Sector and U.S. Government Contracts
Gao ID: GAO-10-639R May 4, 2010On March 23, 2010, we issued a report entitled Firms Reported in Open Sources as Having Commercial Activity in Iran's Oil, Gas, and Petrochemical Sectors. Based on open sources, we identified 41 foreign firms as having commercial activity in these vital sectors of Iran's economy from 2005 to 2009. As you requested, this report identifies which of the 41 firms in our March 2010 report had contracts with the United States government from fiscal years 2005 to 2009. Our March 2010 report and this report are intended to support congressional consideration of U.S. sanctions against Iran, including proposed legislation to expand the Iran Sanctions Act (ISA).
From fiscal years 2005 through 2009, the U.S. government obligated almost $880 million in contracts to seven of the 41 firms identified in our March 2010 report. U.S. agencies obligated almost 90 percent of these funds for purchases of fuel and petroleum products overseas. According to FPDS-NG, the Department of Defense (DOD) obligated funds to (1) Repsol of Spain for the purchase of fuel for naval and aviation purposes; (2) Total of France for the purchase of fuel, including jet fuel, gasoline, and diesel; (3) Daelim Industrial Co. of South Korea for the construction of family housing at a U.S. Army base in South Korea; (4) ENI of Italy for the purchase of petroleum products; (5) PTT Exploration and Production of Thailand for the purchase of jet fuel and other petroleum products; (6) Hyundai Heavy Industries of South Korea for the purchase of power transformers; and (7) GS Engineering and Construction of South Korea (then known as LG Engineering and Construction) for the construction of office buildings in South Korea.
GAO-10-639R, Firms Reported to Have Commercial Activity in the Iranian Energy Sector and U.S. Government Contracts
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GAO-10-639R:
United States Government Accountability Office:
Washington, DC 20548:
May 3, 2010:
The Honorable Joseph I. Lieberman: Chairman:
Committee on Homeland Security and Governmental Affairs:
United States Senate:
The Honorable Jon Kyl:
Ranking Member:
Subcommittee on Terrorism and Homeland Security:
Committee on the Judiciary:
United States Senate:
Subject: Firms Reported to Have Commercial Activity in the Iranian
Energy Sector and U.S. Government Contracts:
On March 23, 2010, we issued a report entitled Firms Reported in Open
Sources as Having Commercial Activity in Iran's Oil, Gas, and
Petrochemical Sectors.[Footnote 1] Based on open sources, we
identified 41 foreign firms as having commercial activity in these
vital sectors of Iran's economy from 2005 to 2009.[Footnote 2] As you
requested, this report identifies which of the 41 firms in our March
2010 report had contracts with the United States government from
fiscal years 2005 to 2009.
Our March 2010 report and this report are intended to support
congressional consideration of U.S. sanctions against Iran, including
proposed legislation to expand the Iran Sanctions Act (ISA). We did
not use ISA criteria or monetary thresholds when identifying firms and
did not attempt to determine whether firms meet the legal criteria for
an investment specified in ISA.[Footnote 3] Under the existing Iran
Sanctions Act, persons, including firms, that invest more than $20
million in Iran's energy sector in any 12-month period may be banned
from U.S. government procurement.[Footnote 4] In 1998, the United
States made its first and only determination that a firm's investments
constituted activity covered by Iran Sanctions Act. The sanctions were
waived because the Secretary of State determined it was in the
national interest to do so. The U.S. Senate and House of
Representatives have passed separate bills to expand U.S. sanctions
against Iran and are now working to resolve differences.[Footnote 5]
To identify which of the 41 firms listed in our March 2010 report also
had U.S. government contracts, we searched the Federal Procurement
Data System-Next Generation (FPDS-NG) for fiscal years 2005 through
2009. We first searched in FPDS-NG for firms with identical names and
other identifying information as the firms listed in our March 2010
report, and we found seven firms with identical names. We verified
that those seven firms were among the firms listed in our March 2010
report. We then corroborated the information in FPDS-NG on the seven
firms by obtaining U.S. contracts and other evidence that confirmed
the existence of contracts with these firms. Enclosure I provides our
scope and methodology for this report and enclosure II lists the 41
firms from our March 2010 report.
We conducted our work from March to April 2010 in accordance with all
sections of GAO's Quality Assurance Framework that are relevant to our
objective. The framework requires that we plan and perform the
engagement to obtain sufficient and appropriate evidence to meet our
stated objective and discuss any limitations in our work. We believe
that the information and data obtained, and the analysis conducted,
provide a reasonable basis for any findings and conclusions.
Seven Firms with Commercial Activity in the Iranian Energy Sector Also
Had Contracts with the U.S. Government:
From fiscal years 2005 through 2009, the U.S. government obligated
almost $880 million in contracts to seven of the 41 firms identified
in our March 2010 report.[Footnote 6] U.S. agencies obligated almost
90 percent of these funds for purchases of fuel and petroleum products
overseas. The firms are presented in table 1 in order of magnitude of
obligations, as reported in FPDS-NG.
Table 1: Firms Reported in Open Sources as Having Commercial Activity
in the Iranian Energy Sector and Reported to Have U.S. Government
Contracts:
Firm/country[A]: Repsol/Spain;
U.S. Government obligations[B]: FY 2005: $40 million;
U.S. Government obligations[B]: FY 2006: $37 million;
U.S. Government obligations[B]: FY 2007: $110 million;
U.S. Government obligations[B]: FY 2008: $81 million;
U.S. Government obligations[B]: FY 2009: $51 million;
U.S. Government obligations[B]: Total: $319 million.
Firm/country[A]: Total/France;
U.S. Government obligations[B]: FY 2005: $0;
U.S. Government obligations[B]: FY 2006: $27 million;
U.S. Government obligations[B]: FY 2007: $0;
U.S. Government obligations[B]: FY 2008: $154 million;
U.S. Government obligations[B]: FY 2009: $131 million;
U.S. Government obligations[B]: Total: $312 million.
Firm/country[A]: Daelim Industrial Co./South Korea;
U.S. Government obligations[B]: FY 2005: $0;
U.S. Government obligations[B]: FY 2006: $0;
U.S. Government obligations[B]: FY 2007: $0;
U.S. Government obligations[B]: FY 2008: $0;
U.S. Government obligations[B]: FY 2009: $111 million;
U.S. Government obligations[B]: Total: $111 million.
Firm/country[A]: ENI/Italy;
U.S. Government obligations[B]: FY 2005: $9 million;
U.S. Government obligations[B]: FY 2006: $88 million;
U.S. Government obligations[B]: FY 2007: Less than $100,000;
U.S. Government obligations[B]: FY 2008: $0;
U.S. Government obligations[B]: FY 2009: $0;
U.S. Government obligations[B]: Total: $97 million.
Firm/country[A]: PTT Exploration and Production/Thailand;
U.S. Government obligations[B]: FY 2005: $21 million;
U.S. Government obligations[B]: FY 2006: $4 million;
U.S. Government obligations[B]: FY 2007: $6 million;
U.S. Government obligations[B]: FY 2008: $1 million;
U.S. Government obligations[B]: FY 2009: $3 million;
U.S. Government obligations[B]: Total: $35 million.
Firm/country[A]: Hyundai Heavy Industries/South Korea;
U.S. Government obligations[B]: FY 2005: $1 million;
U.S. Government obligations[B]: FY 2006: $2 million;
U.S. Government obligations[B]: FY 2007: $1 million;
U.S. Government obligations[B]: FY 2008: $0;
U.S. Government obligations[B]: FY 2009: $0;
U.S. Government obligations[B]: $5 million.
Firm/country[A]: GS Engineering and Construction/South Korea;
U.S. Government obligations[B]: FY 2005: Less than $100,000;
U.S. Government obligations[B]: FY 2006: $0;
U.S. Government obligations[B]: FY 2007: $0;
U.S. Government obligations[B]: FY 2008: $0;
U.S. Government obligations[B]: FY 2009: $0;
U.S. Government obligations[B]: Total: Less than $100,000.
Total:
U.S. Government obligations[B]: FY 2005: $71 million;
U.S. Government obligations[B]: FY 2006: $158 million;
U.S. Government obligations[B]: FY 2007: $117 million;
U.S. Government obligations[B]: FY 2008: $236 million;
U.S. Government obligations[B]: FY 2009: $296 million;
U.S. Government obligations[B]: Total: $879 million.
Source: GAO analysis of Federal Procurement Data System-Next
Generation records and other government records.
Note: Totals may not add due to rounding.
[A] The country listed is the physical location of the firm as
reported in open sources.
[B] We confirmed that each of these firms had U.S. government
contracts by obtaining official documents and statements that
confirmed the existence of contracts with these firms. Of the
obligation amounts reported in the table, we tested 8 instances
against U.S. government contractual documents and official statements.
We determined the amounts were consistent with the information
reported in FPDS-NG.
[End of table]
According to FPDS-NG, the Department of Defense (DOD) obligated funds
to:
* Repsol of Spain for the purchase of fuel for naval and aviation
purposes;
* Total of France for the purchase of fuel, including jet fuel,
gasoline, and diesel;
* Daelim Industrial Co. of South Korea for the construction of family
housing at a U.S. Army base in South Korea;[Footnote 7]
* ENI of Italy for the purchase of petroleum products;
* PTT Exploration and Production of Thailand for the purchase of jet
fuel and other petroleum products;
* Hyundai Heavy Industries of South Korea for the purchase of power
transformers;[Footnote 8] and:
* GS Engineering and Construction of South Korea (then known as LG
Engineering and Construction) for the construction of office buildings
in South Korea.
Agency Comments:
We provided the Departments of State and Defense a draft of this
report for comment. The Department of State provided technical
suggestions which we have incorporated as appropriate.
DOD provided oral comments on the draft. DOD stated that it contracts
for services, supplies, and construction worldwide in support of
military operations. According to DOD, these contracts are critical to
meeting mission requirements; however, contracting overseas is
compounded by a limited number of contractors who are able to perform
where DOD requires support. DOD stated they must meet Federal
Acquisition Regulation requirements to evaluate the qualifications of
a contractor. A DOD review of current and active records in the
Excluded Parties Listing System and the Office of Foreign Assets
Control Specialty Designated Nationals List, operated by the
Departments of State and Treasury, did not find any contractors listed
in this report. According to DOD, the seven firms listed in this
report are qualified to contract with the federal government and DOD
and are not excluded from such contracts.
As agreed with your offices, unless you publicly announce the contents
of this report earlier, we plan no further distribution until 30 days
from the report date. At that time, we will send copies of the report
to interested committees, the Secretary of State, and the Secretary of
Defense. In addition, the report will be available at no charge on the
GAO Web site at [hyperlink, http://www.gao.gov].
If you or your staffs have any questions about this report, please
contact me at 202-512-8979 or christoffj@gao.gov. Major contributors
to this report include Tetsuo Miyabara (Assistant Director), Jon
Fremont, Julia Kennon, and Pierre Toureille. Technical support was
provided by Martin De Alteriis, Grace Lui, Jodi Munson, and Joseph
Carney.
Sincerely,
Signed by:
Joseph A. Christoff:
Director, International Affairs and Trade:
[End of section]
Enclosure I: Scope and Methodology:
To determine the extent to which firms identified in open sources as
having commercial activity in Iran's energy sector also have contracts
with the U.S. government, we searched the Federal Procurement Data
System-Next Generation (FPDS-NG) for references to the 41 firms
identified in our March 2010 report. As we described in that report,
each of these 41 firms had (1) been cited in at least three standard
industry publications as having commercial activity in a specific
project, or (2) provided information on its corporate web site about
its involvement in a specific project and had been cited as having
been involved in the same project by at least one standard industry
publication.[Footnote 9] We chose FPDS-NG to determine if any of these
41 firms also had contracts with the U.S. government because FPDS-NG
has served as the primary governmentwide contracting database since
1978. Congress, executive branch agencies, and the public rely on FPDS-
NG for a broad range of data on agency contracting actions,
procurement, and spending.[Footnote 10] The Office of Management and
Budget established FPDS-NG, and the U.S. General Services
Administration administers the system.[Footnote 11] More than 60
government departments, agencies, and other entities submit contract
data to FPDS-NG. FPDS-NG contains data on obligations, which are
recorded when a government agency enters into a contract to purchase
services or goods.
We searched the FPDS-NG archives from fiscal years 2005 through 2009
using search terms that would select any record with the same firm
name as identified in our March 2010 report. After matching firms from
our March 2010 list with records in FPDS-NG, we obtained the Data
Universal Numbering System (DUNS) numbers for the firms determined to
be identical matches, and searched FPDS-NG for these DUNS
numbers.[Footnote 12] With certain exceptions, all firms that do
business with U.S. agencies are required by the U.S. government to
register with the U.S. government central contractor registration
(CCR) and obtain a unique DUNS number. We matched all of the data in
table 1 to individual firms' DUNS numbers.
We took steps to corroborate key FPDS-NG information by obtaining U.S.
government documents and public statements that confirmed that these
seven firms have U.S. contracts. To do so, we searched (1) the
Department of Defense's Electronic Document Access system[Footnote 13]
to locate copies of relevant contract documents and (2) the U.S. Army
Corps of Engineers website for announcements of contracts.
Our searches for U.S. contracts only covered firms that we had
identified as being directly involved in commercial activity in the
Iranian energy sector. Therefore we included a parent firm or
subsidiary only if that firm had also been reported in open sources as
having commercial activity in the Iranian energy sector. For example,
in our March 2010 report, we included two parent firms and two of
their subsidiaries because all were reported in open sources as having
commercial activity in the Iranian energy sector.
[End of section]
Enclosure II: Foreign Firms Publicly Reported to Have Commercial
Activity in the Iranian Oil, Gas, or Petrochemical Sectors:
This table provides information from our March 2010 report. We did not
attempt to determine if these firms meet the legal criteria specified
in the Iran Sanctions Act.
Table 2: Foreign Firms Publicly Reported to Have Commercial Activity
in the Iranian Oil, Gas, or Petrochemical Sectors:
Firm: ABB Lummus;
Country[A]: Not applicable;
Sector: Refining, petrochemicals.
Firm: Amona;
Country[A]: Malaysia;
Sector: Oil exploration and production.
Firm: Belneftekhim;
Country[A]: Belarus;
Sector: Oil exploration and production.
Firm: China National Offshore Oil Corporation;
Country[A]: China;
Sector: Natural gas.
Firm: China National Petroleum Corporation;
Country[A]: China;
Sector: Oil exploration and production, natural gas.
Firm: Costain Oil, Gas & Process Ltd.;
Country[A]: United Kingdom;
Sector: Natural gas.
Firm: Daelim;
Country[A]: South Korea;
Sector: Natural gas.
Firm: Daewoo Shipbuilding & Marine Engineering;
Country[A]: South Korea;
Sector: Oil tankers.
Firm: Edison;
Country[A]: Italy;
Sector: Oil exploration and production.
Firm: ENI;
Country[A]: Italy;
Sector: Oil exploration and production.
Firm: Gazprom;
Country[A]: Russia;
Sector: Oil exploration and production, pipeline.
Firm: GS;
Country[A]: South Korea;
Sector: Natural gas.
Firm: Haldor Topsoe;
Country[A]: Denmark;
Sector: Refining.
Firm: Hinduja;
Country[A]: United Kingdom;
Sector: Oil exploration and production, natural gas.
Firm: Hyundai Heavy Industries;
Country[A]: South Korea;
Sector: Oil tankers.
Firm: INA;
Country[A]: Croatia;
Sector: Oil exploration and production, natural gas.
Firm: Indian Oil Corporation;
Country[A]: India;
Sector: Natural gas.
Firm: Inpex;
Country[A]: Japan;
Sector: Oil exploration and production.
Firm: JGC Corporation;
Country[A]: Japan;
Sector: Refining.
Firm: Lukoil;
Country[A]: Russia;
Sector: Oil exploration and production.
Firm: LyondelBasell;
Country[A]: Netherlands;
Sector: Petrochemicals.
Firm: Oil India Ltd.;
Country[A]: India;
Sector: Natural gas.
Firm: Oil and Natural Gas Corporation;
Country[A]: India;
Sector: Oil exploration and production, natural gas.
Firm: OMV;
Country[A]: Austria;
Sector: Natural gas.
Firm: ONGC Videsh Ltd.;
Country[A]: India;
Sector: Natural gas.
Firm: Petrobras;
Country[A]: Brazil;
Sector: Oil exploration and production.
Firm: Petrofield;
Country[A]: Malaysia;
Sector: Natural gas.
Firm: Petroleos de Venezuela S.A.;
Country[A]: Venezuela;
Sector: Natural gas.
Firm: Petronet LNG;
Country[A]: India;
Sector: Natural gas.
Firm: PGNiG;
Country[A]: Poland;
Sector: Natural gas.
Firm: PTT Exploration & Production;
Country[A]: Thailand;
Sector: Natural gas.
Firm: Repsol;
Country[A]: Spain;
Sector: Natural gas.
Firm: Royal Dutch Shell;
Country[A]: Netherlands;
Sector: Natural gas.
Firm: Sinopec;
Country[A]: China;
Sector: Oil exploration and production, refining.
Firm: SKS Ventures;
Country[A]: Malaysia;
Sector: Natural gas.
Firm: Snamprogetti;
Country[A]: Italy;
Sector: Pipeline.
Firm: StatoilHydro;
Country[A]: Norway;
Sector: Oil exploration and production, natural gas.
Firm: Tecnimont;
Country[A]: Italy;
Sector: Petrochemicals.
Firm: Total;
Country[A]: France;
Sector: Natural gas.
Firm: Turkish Petroleum Company;
Country[A]: Turkey;
Sector: Natural gas.
Firm: Uhde;
Country[A]: Germany;
Sector: Petrochemicals.
Source: GAO analysis of open source information.
[A] The country listed is the physical location of the firm as
reported in open sources.
[End of table]
[End of section]
Footnotes:
[1] GAO, Firms Reported in Open Sources as Having Commercial Activity
in Iran's Oil, Gas, and Petrochemical Sectors, [hyperlink,
http://www.gao.gov/products/GAO-10-515R] (Washington, D.C.: Mar 23,
2010).
[2] Iran's energy industry is vital to its economy and government.
However, Iran has not reached peak crude oil production levels since
1978, does not produce sufficient natural gas for domestic use, and
lacks the refining capacity to meet domestic demand for gasoline,
according to the Department of Energy (DOE) and IHS Global Insight.
Accordingly, Iran is seeking the participation of foreign firms in
providing financing and technical assistance in numerous oil, gas, and
petrochemical projects, according to DOE.
[3] The Secretary of State is responsible for making such
determinations. Our complete methodology for identifying the 41 firms
is described in GAO-10-515R.
[4] Iran-Libya Sanctions Act of 1996, Pub. L. No. 104-172, § 5, 110
Stat. 1541, 1543 as amended. Other sanctions include a denial of
Export-Import Bank assistance, a ban on issuing licenses to export
controlled technologies to the sanctioned firm, and other sanctions
that fall under the powers of the International Emergency Economic
Powers Act.
[5] The House of Representatives passed H.R. 2194, the Iran Refined
Petroleum Sanctions Act of 2009, on December 15, 2009. On March 11,
2010, the Senate amended and passed H.R. 2194, renaming it the
Comprehensive Iran Sanctions, Accountability, and Divestment Act of
2009. The Senate also asked for a conference on the bill on March 11,
2010.
[6] An obligation is recorded when a government agency enters into a
binding agreement to purchase services or goods.
[7] The U.S. Army Corps of Engineers has announced that it has
contracted with Daelim Industrial to construct family housing at a
U.S. base in South Korea. See [hyperlink, http://www.army.mil/-
news/2009/08/09/25673-corps-of-engineers-awards-contract-for-new-
family-housing-at-usag-humphreys/].
[8] According to FPDS-NG, the Department of Energy also obligated
funds to Hyundai Heavy Industries of South Korea for the purchase of
power transformers.
[9] Our complete methodology for identifying these 41 firms is
described in GAO, Firms Reported in Open Sources as Having Commercial
Activity in Iran's Oil, Gas, and Petrochemical Sectors, [hyperlink,
http://www.gao.gov/products/GAO-10-515R] (Washington, D.C.: Mar 23,
2010). As noted in GAO-10-515R, we did not attempt to determine
whether the listed firms meet the legal criteria for an investment
specified in the Iran Sanctions Act. The Secretary of State is
responsible for making such determinations.
[10] FPDS-NG can be accessed at [hyperlink,
https://www.fpds.gov/fpdsng_cms/]. Reporting requirements for FPDS-NG
are in Federal Acquisition Regulation (FAR) subpart 4.6, FPDS-NG data
are described in FAR 4.602.
[11] For more information on FPDS-NG and other federal procurement
data systems, see GAO, Federal Contracting: Observations on the
Government's Contracting Data Systems, [hyperlink,
http://www.gao.gov/products/GAO-09-1032T] (Washington, D.C.: Sept. 29,
2009).
[12] Data Universal Numbering System (DUNS) numbers are 9-digit
identifying numbers obtained by firms through Dun and Bradstreet to
uniquely identify a firm. Dun and Bradstreet is a leading source of
commercial information, and maintains a commercial database with more
than 140 million business records. U.S. vendors must be registered in
the U.S. Central Contract Registry prior to the award of a U.S.
government contract and a firm must have a DUNS number to register. We
also compared the street addresses of the firms listed in our March
2010 report with street addresses listed in the U.S. government
central contractor registration (CCR) data system [hypertlink,
https://www.bpn.gov/ccr/].
[13] The Electronic Document Access system is a Department of Defense
online system designed to provide acquisition-related information.
[End of section]
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