Western Oil Giant Expected to Return to Iran
French oil giant Total is expected to sign a deal on Tuesday with Iran to develop the country’s largest natural gas field, paving the way for Western oil firms’ return to the Persian Gulf country.
Total would be the first European integrated oil company to sign a contract to develop Iranian oil or gas assets following the lifting of sanctions on Tehran earlier this year. The deal would also advance Iran’s goal of tapping its vast oil and natural gas reserves, which are the fourth and second largest in the world, respectively
Total will lead a consortium that includes the China National Petroleum Corporation and Iran’s Petropars to develop the South Pars field in the Persian Gulf, the AFP reported, citing the Iranian oil ministry. The deal is worth $6 billion and needs to be finalized within six months, the source told the AFP
Total and other European energy giants began pulling out of Iran in 2008 as the international community ratcheted up sanctions on Iran over its nuclear program. Total had previously been involved in developing South Pars, which contains nearly 40 percent of Iran’s massive natural gas reserves.
As Europeans exited Iran, the China National Petroleum Corporation and other Chinese firms continued their development plans thanks to a loophole that allowed firms investing $20 million or less in the country’s oil and gas sector to keep doing business there. But steadily escalating sanctions eventually made it too onerous for the Chinese drillers to meet the obligations of their contracts with Tehran.
Iran is seeking to attract roughly $200bn of investment into its oil and gas industry. A key component of that is a new model petroleum contract, which allows foreign firms to participate in more phases of development and production than the old “buy-back” contract.
European oil companies have been eager to re-enter Iran, but continue to mull over the terms of the new contract and watch for signs that major financial institutions will resume operations there.
Major natural gas fields in Iran
Analyst say the outcome of Iran’s elections next spring will be critical to determining the investment outlook. The outward-looking moderate President Hassan Rouhani, whose administration brokered the nuclear deal, will face off against Iranian hardliners who are skeptical of international involvement their country’s energy sector.
Total did not immediately return a request for response.
A spokesperson for Royal Dutch Shell recently confirmed to CNBC that the company is considering areas of cooperation with Iran’s National Petrochemical Company. However, “It is much too early to discuss potential Shell investment in any project,” said Nureddin Wefati, Shell’s head of media relations for the Middle East and North Africa.
“Basically, Iran has a great potential in terms of oil and gas reserves. However, we are still trying to understand the contractual frameworks that will be adopted for the oil & gas industry in the country. In view of that, we will evaluate any possible opportunity,” he told CNBC in an email.
U.S.-headquartered oil companies like Exxon Mobil and Chevron are still prohibited from doing business in Iran or with Iranian individuals due to U.S. sanctions on Tehran over its alleged human rights abuses and support for American-designated terror groups.
Iran, the third largest OPEC producer, has recently increased oil exports as it seeks to regain market share following years of sanctions that crippled its economy.
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