Total pulls out of Iranian gas project
Print Edition
French energy giant Total has officially quit its multi-billion-dollar gas project in Iran, Oil Minister Bijan Namdar Zanganeh said yesterday, following the reimposition of US sanctions.
“Total has officially left the agreement for the development of phase 11 of South Pars (gas field),” he told parliament’s news agency ICANA, adding that it had been over two months since the French firm said it would leave.
Zanganeh also appeared before parliament to underline the dire state of Iran’s oil and gas facilities, which he said were “worn out” and in need of renovation that Iran could not afford.
The United States said in May that it was abandoning the 2015 nuclear deal and reimposing sanctions on Iran in two phases in August and November, with the second targeting the country’s vital oil and gas sector.
The other parties to the nuclear deal — Britain, France, Germany, China and Russia — have vowed to stay in the accord but their companies risk huge penalties if they keep doing business in Iran.
Total had already said it would be impossible to remain in Iran unless it received a specific waiver from Washington, which was not granted.
The French firm signed up in July 2017 for the US$4.8 billion project to develop the field off Iran’s southern coast, as the lead partner alongside the China National Petroleum Corporation and Iran’s Petropars.
It was due to bring state-of-the-art technology to create the pressure needed to tap the gas field, which Iran could then replicate for surrounding fields where pressure has been declining.
Total was due to make an initial US$1 billion investment, but the company said in May that it had spent under 40 million euros (US$46 million) on the project to date, as uncertainty over US actions mounted.
The company would have been highly vulnerable to US penalties for remaining in Iran.
It has US$10 billion of capital employed in its US assets, and US banks are involved in 90 percent of its financing operations, Total said in May.
Zanganeh said the process to find a replacement for Total was underway.
But it is unlikely that CNPC or Iran’s own firms can take over the project, said Homayoun Falakshahi, an energy analyst for Wood Mackenzie in London.
“The technology Total was hoping to implement would have been world-first, using electricity to compress the gas,” he said.
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