BP and EU lobbied U.S. on Iran sanctions - sources

LONDON (Reuters) - BP (BP..LO)Plc, the British government and the European Union lobbied U.S. lawmakers to have a BP-led oil and gas project exempted from proposed new U.S. sanctions which seek to stop Western companies doing business with Iran, sources close to the matter said.

The U.S. Senate is mulling new sanctions to constrict the funding that Western nations suspect Iran is using to develop nuclear weapons.

One congressional aide said senators were discussing provisions that could bar companies like BP from working with the National Iranian Oil Company (NIOC).

NIOC's subsidiary, Naftiran Intertrade Co, owns a 10 percent stake in the Shah Deniz project in Azerbaijan which is co-led by BP and Norway's Statoil and which is estimated to contain 1.2 trillion cubic metres of gas.

Production at the deposit began in 2006, while second phase production -- which is expected to help reduce Europe's reliance on Russia for its gas supplies -- is expected to begin by late 2016 or early 2017.

"The EU has requested that the United States exempt Shah Deniz from U.S. sanctions on the grounds that the project is important to EU energy security," a British government source said.

BP acknowledged discussing the matter with lawmakers.

"We have routine engagement with Congress and we regularly provide information to help them understand the impact of potential legislation on certain activities we are involved in," a spokesman said.

BP has already been forced to shut production at the Rhum gas field in the North Sea, following European Union (EU) sanctions, because the Iranian Oil Co Ltd holds 50 percent.

However, Shah Deniz was exempted from these sanctions because it was seen as more strategic.

The U.S. is also an eager supporter of the project as it is keen for Europe to reduce its reliance on Russia for energy imports.

Legislation containing new sanctions against Iran that passed the House of Representatives in December appears to exempt Shah Deniz.

The legislation, sponsored by Representative Ileana Ros-Lehtinen, says that nothing in the bill shall apply to activities "involving a natural gas development and pipeline project initiated prior to the date of enactment of this Act, to bring gas from Azerbaijan to Europe and Turkey."

It would also exclude activities "for the purpose of providing energy security and independence from Russia."

In the Senate, lawmakers are drafting legislation that is similar to the House-passed bill, but since it is a work in progress, it is unclear at this point whether that legislation will include the same exemption.

(Additional reporting by Susan Cornwell in Washington; Editing by Hans-Juergen Peters and Helen Massy-Beresford)