Iran signs major gas deal with France's Total

Iran signed a gas deal with France's Total, making it their first big contract with a Western energy firm.

Published: 08th November 2016 04:03 PM  |   Last Updated: 08th November 2016 04:03 PM   |  A+A-


An Iranian man works at an oil facility in the Khark Island, on the shore of the Gulf. (File Photo | AFP)


TEHRAN: Iran signed a deal with France's Total on Tuesday to develop a major offshore gas field, its first big contract with a Western energy firm since sanctions were loosened in January.

Total will lead a consortium also including China National Petroleum Corporation (CNPC) and Iran's Petropars to develop Phase 11 of the South Pars field under a 20-year contract worth $4.8 billion (4.3 billion euros). 

The project will eventually supply 50.94 million cubic metres (1.8 billion cubic feet) of gas per day into Iran's national grid, and marks a breakthrough in the oil ministry's efforts to attract Western investment and know-how to improve its outdated energy infrastructure.

The companies involved signed a memorandum of understanding in Tehran on Tuesday, and the final agreement will be signed early next year, Total's head of Middle East exploration and production, Stephane Michel, said.

It is the first deal of its kind since most international sanctions on Iran were lifted in January under a nuclear deal with world powers.

It also represents Total's return to Iran, which has the second-largest gas reserves and fourth-largest oil reserves in the world. 

Total helped develop phases two and three of South Pars, but left four years ago when France joined European Union partners in imposing sanctions, including an oil embargo.

"Total is delighted to have been selected by NIOC (National Iranian Oil Company) -– it is a recognition of both our technical expertise and the partnership the Group has built with Iran over the years," Total chairman Patrick Pouyanne said in a statement.

Iran's Oil Minister Bijan Zanganeh thanked Total and CNPC for working with Iran despite "difficult conditions". 

"I hope the international companies that are still hesitating to come to Iran will be encouraged to take the leap," he said.

The French firm signed a general agreement back in 2004 for the development of Phase 11 and a gas plant, but it was never finalised. 

The South Pars field in the heart of the Gulf is shared by Iran and Qatar, and contains some 14 trillion cubic metres (494 trillion cubic feet) of gas -- 8 percent of the world's known reserves.

Under the new deal, Total will control 50.1 percent of the consortium, with CNPC taking a 30 percent stake and Petropars 19.9 percent.

The first phase will cost around $2 billion and consist of 30 wells and two well-head platforms connected to existing onshore treatment facilities.

"Total will develop the project in strict compliance with national and international laws," Pouyanne said. "This project fits with the Group's strategy of expanding its presence in the Middle East, where the origins of the Group lie."

Despite the government's hunt for Western partners, a history of foreign exploitation has left Iran highly sensitive to the presence of international firms in its energy sector.

Iranian officials announced last month that they would invite the first tenders for oil projects within two months and that foreign firms would be allowed to take lead roles. 

But that sparked criticism from some conservatives, and Zanganeh later clarified that two domestic conglomerates would also be allowed to bid to lead the projects. 

The conglomerates were identified as Khatam Al Anbia, which is controlled by the elite Revolutionary Guards, and Setad, which is supervised by the supreme leader's office.


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