Iran to sign landmark gas deal with French, Chinese companies

by Antonio Miles July 4, 2017, 0:42
Iran to sign landmark gas deal with French, Chinese companies

The contract has a 20-year duration, extendable by another five years.

Saeed Laylaz, a reform-minded Iranian analyst, told the Financial Times on July 3 that the Total contract showed "that the US's new [Iran sanctions] policies are either rhetoric or have failed". Iran Petroleum Contract (IPC) is the latest Iranian oil contract which is a promoted as a hybrid model of a risked service contract (RSC) featuring minimum contractual work commitment, production plateau, unit Opex, fee per barrel, and the speed of cost recovery.

Current US President Donald Trump is still reviewing the sanctions against Iran, as his administration has maintained that Tehran is linking nuclear enrichment to its ballistic missiles. It will develop the phase II of the project for up to $5 billion.

"It's an exceptional situation, by a long stretch", he said of Total's contract.

European majors are warming to Iran in the post-sanctions environment.

The world's fourth-largest oil and gas company has pledged to make an initial $1 billion investment to develop Phase 11 as it aims to produce 50 million cubic meters of natural gas daily from the phase.

"The South Pars Phase 11 deal will, Iran hopes, prompt other IOCs to re-enter the country's upstream sector". Some oil executives said that when traveling to Iran to meet with officials there, for instance, they take only laptops stripped of sophisticated software like encryption programs, and older models of mobile phones, to avoid accidentally violating export controls.

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A Shell spokeswoman said the company remained "interested in exploring the role it can play in developing Iran's energy potential".

Reportedly, with U.S. sanctions still in place prohibiting trading with Iran in dollars, Total will finance the project in euros from its own resources. The signing of the final document was postponed to allow for inspections to ensure compliance with USA sanctions against Iran. Total said it was in compliance with all sanctions.

"The company has expressed willingness (about investment in Iran) and negotiations continue in this regard", he added.

India has reportedly already announced that a consortium of domestic businesses would offer up to $11 billion to develop another of Iran's natural gas fields, Farzad-B field, and create the infrastructure to export the fuel, according to Bloomberg.

The investment will be the first deal conducted under Iran's new Iranian Petroleum Contract (IPC).

The French company will serve as the operator of South Pars Phase 11 with its 50.1 percent stake in the project. CNPC owns its own financial institution, Kunlun, one of the few sizable banks that work with Tehran.

The vast offshore gas field is shared between Iran and Qatar, where Total is also a major player in gas production as well as in oil and refining.

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