Major Iran-Total Oil Investment Deal Signed; Iran’s Share 19.9 Percent

Iran’s National Oil Company and a consortium led by France’s Total signed the first oil contract based on a new model of agreements for the development of Phase 11 of the South Pars field. Under this agreement, Total and Chinese companies will hold approximately eighty percent of shares in the South Pars project, while Iran will hold 19.9 percent of the shares.

According to IRNA, based on this contract signed on Monday, the 12th of Tir, by the CEO of Iran’s National Oil Company and executives of Total France, China’s National Petroleum Corporation, and Iranian PetroParas company, the consortium will invest 4 billion and 800 million dollars in the development of Phase 11 of the South Pars gas field to increase Iran’s extraction capacity from this field to 56 million cubic meters.

Under this agreement, French company Total will hold 50.1 percent, China’s National Petroleum Corporation will hold 30 percent, and Iran’s PetroParas company will hold 19.9 percent of the shares in this South Pars project.

The South Pars gas field is the world’s largest gas resource, located on Iran’s southern border in the Persian Gulf and shared with Qatar. The field covers 9,700 square kilometers, with Iran’s share comprising 3,700 square kilometers.

The gas reserves in this section of the field total 14 trillion cubic meters of gas along with 18 billion barrels of gas condensates, which accounts for eight percent of the world’s total gas and nearly half of the country’s gas reserves.

An important feature of this contract is planning for the construction of pressure maintenance platforms in South Pars for the first time in Iran. These platforms raise the pressure of gas and oil reserves after pressure drop caused by extraction, preventing production decline.

Gas production is scheduled to begin 40 months after the contract signing from two production platforms, and after pressure drop, the pressure maintenance platforms will be launched.

ILNA news agency, in publishing details of the contract, reported that the contract duration is twenty years and the repayment of the direct capital costs of the second party will be ten years.

Possible U.S. Government Response

The United States government, which considers the Iranian government a supporter of terrorism, is strongly opposed to investments by international companies in Iran.

Behnam Taleblu, a researcher at the Defense of Democracies Institute, told Voice of America about the possible reaction of the Trump administration to Total’s deal with Iran: “This contract provides an excellent opportunity for President Trump’s government to use this agreement and point to Total’s level of participation in it to remind its European allied governments and their companies of Iran’s history of supporting terrorism.”

According to him, Mr. Trump’s government can also point to PetroParas’s poor track record and send a message to American partners and Chinese companies that have been in Iran since the early 2000s. Mr. Taleblu said: “Total left Iran once between 2006 and 2009, so it is appropriate to remind them again of the reasons for this withdrawal.”

Nevertheless, Total’s CEO in Tehran has expressed satisfaction with the company’s return to Iran.

Total CEO: Next Step is Investment in Petrochemicals

Patrick Pouyanné, CEO of Total, said at the contract signing ceremony that he is pleased that Total is the first international company to return to Iran after the lifting of sanctions and the first to sign a contract under the new model of oil contracts.

He said: “I promised the minister that more than 50 percent of the supply of Phase 11 of South Pars will be awarded to Iranian companies. We are also committed to transferring our expertise to Iranian experts.”

Total’s CEO also emphasized that he is confident he will travel to Iran to sign other contracts as well.

He told ISNA that Total’s next step in Iran is presence in the petrochemical sector and upstream oil sector.

Total’s CEO also met with Hassan Rouhani, Iran’s President, on Monday.

Zanganeh: This Deal is a Result of JCPOA

Bijan Zanganeh, at the contract signing ceremony, considered it a result of JCPOA and the recent presidential elections, saying he hopes that this contract will mark a new phase in Iran’s oil industry.

Mr. Zanganeh said that based on the five-year plan, 200 billion dollars in capital should be attracted for the oil industry, with more than 70 percent of it coming from foreign sources. He added: “Iran’s goal is to produce six million barrels of crude oil and gas condensates by the end of the sixth development plan.”

He also said that from the perspective of the Ministry of Petroleum, there is no objection to the presence of American companies in Iran’s oil projects.

Officials of the Islamic Republic’s oil sector had previously announced that Iran’s oil and gas facilities require billions of dollars in foreign investment for modernization and development. This comes despite the fact that the continuation of some of America’s non-nuclear sanctions in the currency exchange sphere has made investment in Iran difficult.

On the other hand, opposition from institutions and government critics to the new model of oil contracts, which the government designed to encourage foreign investors, delayed the presentation of the contract model to the Ministry of Petroleum’s customers, but ultimately the first foreign investment contract based on the new model of oil contracts was signed with Total.

Now the Iranian government hopes that by signing contracts like the Total deal, it will pave the way for other companies to enter.

Source: Voice of America