General Electric Co. is plotting a strategy for its oil and gas business in Iran as the U.S. eases sanctions with the petroleum-rich country.

Lorenzo Simonelli, head of the company�s crude division, said he visited Iran in recent weeks to �understand what was taking place in the country.� GE will only proceed if government rules allow the company to do business there, he said.

�Iran is a big market from an oil and gas perspective,� Simonelli said Wednesday in an interview at Bloomberg�s New York headquarters. �We will abide by the sanctions, but it�s a market where we used to transact.�

Geographic expansion is part of a broad growth strategy for London-based GE Oil & Gas that may include acquisitions and more-advanced product offerings. Building out the division is central to Chief Executive Officer Jeffrey Immelt�s transformation of GE into a more streamlined industrial manufacturer. The company has agreed to sell more than $150 billion of finance assets in the past year and is unloading the home-appliances unit.
Huge Bonanza
For oil explorers and the service companies, Iran represents a huge bonanza. The Persian Gulf nation�s 157.8 billion-barrel cache of untapped oil is more than four times the U.S. endowment, according to the Energy Information Administration in Washington. The country also boasts large natural gas reserves.

A number of nations eased trade restrictions with Iran in January as the Islamic Republic curbed its nuclear program. Remaining U.S. sanctions allow foreign subsidiaries of American companies to operate in Iran, but they require a separation of those projects from U.S. employees and offices.

GE�s oil and gas division is one of the world�s largest equipment manufacturers for crude explorers. Its gear is used on land to boost production in aging wells and sits on the seafloor under miles of water to regulate the stream of crude coming from below the Earth�s crust.

GE is pursuing growth as it weathers a slowdown in global activity driven by the collapse in crude prices. Revenue in GE Oil & Gas fell 14 percent last year to $16.5 billion and may drop another 10 percent to 15 percent in 2016, the company has said.

The division has reduced headcount to about 39,000 from 44,000 during the downturn, which is �in line with the industry,� Simonelli said. �As we see the industry continuing to ebb and flow, we have to take the appropriate actions.�
Slashed Spending
Energy companies slashed more than $100 billion in spending worldwide last year and cut 250,000 jobs amid the oil price decline. Brent, the global benchmark for crude, has fallen by almost two-thirds since June 2014.

The weakened industry may provide opportunities for GE Oil & Gas, division CEO Simonelli said. The business benefits from the resources of its parent company, which has forecast rising profit and sales this year despite contraction in the oil division.

�There�s no doubt that when you go through a down cycle, it�s good to be part of GE,� he said. The unit expects investment in research and development to remain constant through the slump, he said.

The company has held talks to buy the drill-bits and drilling-services operations of Halliburton Co., which is divesting assets to win antitrust approval for its takeover of Baker Hughes Inc., people familiar with the matter said in December. The transaction was scheduled to close last year, but has been delayed amid reviews by U.S. and European antitrust regulators.
�Bolt On�
While Simonelli didn�t say whether GE would be interested in the Halliburton-Baker Hughes assets, he said his company wouldn�t shy away from doing deals if they make sense.

�There are places that we can bolt on and bolster,� he said. He added that the company�s own digital technology could broaden product capabilities and boost organic growth. GE Oil & Gas is adding sensors to equipment to aid in data collection that will improve operations and reduce unplanned downtime, mirroring efforts in GE�s other businesses.

GE built up its oil and gas unit over the past decade through more than $10 billion in acquisitions, including a $3.3 billion deal in 2013 for Lufkin Industries Inc. While GE is a relatively new entrant to the global oil market, growth has helped the company establish a presence with customers, Simonelli said.

�I think we�re becoming better known as truly an oil and gas industry player,� he said.

This article was written by Rick Clough and David Wethe for Bloomberg Business