South Pars deal facilitates transfer of technology: Rouhani

Laura Christensen
July 4, 2017

Iran plans to sign a new contract to develop its giant South Pars gas field with France's Total and China's CNPC on Monday, the first major Western energy investment since sanctions against Tehran were lifted, an Iranian oil ministry official told Reuters on Sunday.

Homayoun Falakshahi, senior research analyst, Middle East and North Africa Upstream, at Wood Mackenzie, said: "The South Pars Phase 11 deal will, Iran hopes, prompt other worldwide oil companies to re-enter the country's upstream sector".

Total has made a decision to return and develop Phase 11 of the South Pars project, which will cost up to $5 billion.

The state-owned China National Petroleum has a 30% stake, while Iran's Petropars has 19.9%.

South Pars is a giant gas field divided into 29 development phases.

Total said the gas from the Pars field will supply the domestic market from 2021.

Iran expects to produce as much as 56 million cubic meters per day of natural gas from the field once it is in full swing.

"Fortunately, the existence of political will [both] on the Iranian side and among the P5+1 countries led to the agreement with Total", Rouhani said. He said his country needs some $200 billion of investments in its oil industry in the next five years to make up for time lost during sanctions.

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SP11 will be developed in two phases.

The deal totals $4.8 billion according to a Total press release from November 2016, which is the biggest foreign deal for Iran since nuclear sanctions were eased.

Total chief executive Patrick Pouyanne has indicated the first $US1 billion to be pledged would go toward funding the project's first phase. Total's concerns eased in May when the USA waved some sanctions, as required under the deal, meaning that the nuclear agreement would remain in place for at least the time being.

Negotiations between Tehran and oil companies have been further complicated by the election of President Donald Trump in the US who has been very critical of the agreement reached with Iran over its nuclear program in 2015.

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.

Pouyanne, for his part, stressed the importance of making efforts to implement the deal and expressed hope that it would prepare the ground for further cooperation among Iran and other European companies. And some Western companies have been reluctant to jump in since Iran still faces sanctions that prevent firms from transacting with Iran in US dollars.

The U.S. still has restrictions in place that block most American companies from investing in Iran.

Other reports by My Hot News

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