Total signs major Iran gas deal, defying US pressure

July 4, 2017 EHRAN: French energy giant Total defied US pressure on Monday by signing a multibillion-dollar gas deal with Iran, the first by a European firm in more than a decade.

Total will invest an initial $1 billion in the South Pars offshore gas field as part of a consortium with Chinese and Iranian firms.

The 20-year project, which will eventually see the firms inject $4.9bn, is by far the biggest vote of confidence in the Islamic republic since sanctions were lifted under a 2015 nuclear deal with world powers.

“Today, for Total, is a historic day, the day we come back to Iran,” Total CEO Patrick Pouyanne said at the signing ceremony in Tehran.

“We aren’t a political organisation, but I hope this agreement will encourage other companies to come to Iran because economic development is also a way of building peace,” he told AFP. “We are here to build bridges, not walls,” he added.

The project in South Pars, a field shared between Iran and Qatar, is the first under a new Iranian Petroleum Contract which offers better terms to foreign investors but has faced intense criticism from hardliners who said it was too generous.

Oil Minister Bijan Namadar Zanganeh said the deal was a direct result of moderate President Hassan Rouhani’s resounding re-election victory in May and strong public support for rebuilding ties with the West.

“The people said firmly that our oil policies should continue,” he said. “We shall never forget Total being the forerunner.”

Zanganeh said Iran’s oil industry needs some $200bn in investment over the next five years, and European firms have been hungrily eyeing opportunities in a country with the world’s second-largest gas reserves and fourth-largest oil reserves.

But they have been cautious about investing due to continuing US sanctions.

Total has appointed a compliance officer with the sole task of ensuring it does not fall foul of US measures against Iran.

In particular, it must prevent cash flowing to Iran’s elite Revolutionary Guards — a tall order given their extensive and shadowy presence across the Iranian economy.

Just a fortnight ago, the US Senate overwhelmingly passed a bill targeting the Guards over their involvement in regional conflicts and the country’s ballistic missile programme.

The White House is also in the midst of a 90-day review on whether to abandon the nuclear deal entirely, which President Donald Trump threatened to do during his election campaign.

The uncertainty has been enough to deter global firms such as BP from dipping their toes in Iranian waters, while Shell and Russia’s Gazprom have signed only preliminary deals to date.

‘US HOSTILITY’: Even without the threat of sanctions, investing in the Iranian economy is not for the faint-hearted.

Foreign firms in Iran still face “pervasive corruption… high levels of red tape; potential for currency instability (and) reluctance to allow foreign involvement within the domestic economy,” consultancy firm BMI Research wrote in a briefing note Monday.

For all that, Iran’s large population of middle-class consumers presents an irresistible opportunity for many businesses in Europe and beyond.

Any attempt to scupper the nuclear deal will likely face major push-back from its other signatories: Britain, France, Germany, China and Russia.

Foreign Minister Mohammad Javad Zarif was warmly received by EU leaders last month and tweeted that they were committed to the nuclear deal “despite reckless US hostility”.

At the signing on Monday, Pouyanne said “Total has a long history in Iran,” pointing to its development of phases two and three of South Pars in the 1990s.

It will take a 50.1 percent stake in the new phase 11 project, while China National Petroleum Corporation (CNPC) will own 30pc and Iran’s Petropars 19.9pc.

The aim is to start pumping into Iran’s domestic grid in 2021, eventually reaching 56.6m cubic metres (2bn cubic feet) of gas per day.

Iranian officials said the products would be worth a total of $54bn at current prices.

Total had signed up to develop phase 11 back in 2009 but was forced to abandon its Iranian projects in 2012 when France joined European Union partners and imposed sanctions, including an oil embargo.

Published in Dawn, July 4th, 2017

Iran to sign gas deal with France’s Total and China’s CNPC

Iran says French energy giant Total is to sign a contract worth close to $5bn (£3.8bn) to develop an offshore gas field in the Gulf.

It is the biggest foreign deal since most economic sanctions against the country were lifted in 2016.

Oil ministry officials said the deal to develop the South Pars gas field would be signed on Monday in Tehran, with Total getting a 50.1% stake.
China’s CNPC would hold a 30% stake and Iran’s Petropars 19.9%.

Total was planning to sign the contract several months ago, but decided to wait and see if the Trump administration in the US would re-impose sanctions on Tehran.

What lifting Iran sanctions means for world markets

The offshore field, which is shared between Iran and Qatar, was first developed in the 1990s.

Total was one of the biggest investors in Iran before international sanctions were imposed in 2006 over suspicions the country was trying to develop nuclear arms.

Last month Total’s boss Patrick Pouyanne indicated the firm was ready to make an initial $1bn investment in Iran, the third largest producer in oil body Opec.