The Strategist

French Total goes back to Iran

07/03/2017 - 14:10

Today, Tehran will sign an agreement on development of the world's largest gas field, South Pars. The agreement participants will be Total and CNPC on one side and National Iranian Oil on the other. This will be the largest foreign transaction for Iran since the removal of international sanctions from the country in 2016.

Serigne diagne via flickr
Serigne diagne via flickr
The basic principles of this agreement were signed by French Total, Chinese China National Petroleum Corporation (CNPC) and National Iranian Company (NIOC) in November last year. The parties intended to consolidate the agreements by signing a final agreement shortly thereafter. later, however, it was decided to postpone this step for some time: the companies wanted to make sure that this agreement would not violate US sanctions against Iran.

Thus, the final document on the development of the world's largest gas field South Pars will be signed today. The volume of the deal, planned for a period of 20 years, is estimated at almost $ 5 billion, and it will become the largest for Iran since international sanctions were lifted from the country in the last year.

Bloomberg says that the agreement’s signing will take place in Tehran, where Total’s CEO Patrick Pouyanné and representatives of CNPC management will arrive. The French company will receive 50.1% of the gas production project in accordance with the contract, 30% will go to CNPC; NIOC will get the remaining share of 19.9%. Last month, Mr. Pouyanné noted that Total is ready to invest $ 1 billion in the Iranian project at the initial stage, while the total cost of the first stage is estimated at $ 2 billion.

As expected, the production capacity of the project will reach 51 million cubic meters per day. "After the successful development of the second and third phases in South Pars in the 2000s, the company is returning to Iran to develop this giant gas field. Total is happy that NIOC chose us - this is both recognition of our professional competence, and a tribute to the relationships that our company has been building with Iran over many years, says Total’s CEO.

By 2018, Iran is planning to produce more than 700 million cubic meters of gas per day in all 24 phases of South Pars. Achieving this goal requires $ 20 billion in investments, Energy Minister Bijan Namdar Zangeneh said earlier.

The region contains approximately 30 trillion cubic meters of gas and 18 billion barrels of condensate. It is located on an area of 9.7 thousand square kilometers, of which 3.7 thousand are on Iranian territory in the Persian Gulf, and the rest lies within the borders of Qatar.

In 2002, the US and its European partners imposed economic sanctions against Iran, accusing Tehran of developing nuclear weapons under the guise of a peaceful nuclear program. Restrictions were introduced by the European Union, the United States and the UN Security Council. The economic blockade of Iran lasted until 2015. On July 14, Iran and the Western countries agreed to cancel a significant part of the sanctions in exchange for termination of Iran's nuclear program.