Iran is hoping to secure more overseas investment after a consortium led by France’s Total on Tuesday signed a $4.8bn deal to develop part of the giant South Pars gasfield — the first major energy agreement since the country’s landmark nuclear accord.
“This is an icebreaker and we shall see more multibillion-dollar oil and gas contracts with other companies including Russians and Europeans soon,” Amir-Hossein Zamaninia, Iran’s deputy oil minister for international affairs told the Financial Times.
“The next agreement might be in a few weeks,” he added, without giving further details.
Iran has the world’s second-largest gas reserves and fourth-largest oil reserves, according to the US Energy Information Administration, but needs $200bn of investment to revive its antiquated energy sector over the next five years.
Total will be joined by China’s CNPC and Iran’s Petropars to develop Phase 11 of South Pars, the world’s largest gasfield that is shared between Iran and Qatar.
The three companies are expected to invest $4.8bn in Phase 11. On Tuesday the companies signed a provisional agreement in Tehran with the National Iranian Oil Company, the state-controlled energy group.
The final contract, expected to be inked within months, is due to last for 20 years.
The agreement is a big victory for Hassan Rouhani, Iran’s centrist president, who has been questioned by critics at home about the limited economic dividends so far from last year’s agreement with major powers to curb Tehran’s nuclear programme.
Some international sanctions have been lifted, but the continuation of US measures against Iran’s missile programme has made overseas companies, including banks, wary of working with Tehran.
Patrick Pouyanné, chief executive of Total, said the company’s Iranian investment would be done without bank financing and would be “internationally compliant”. The commercial terms were “attractive”, he added.
CNPC could not be reached for comment.
For Iranian oil officials, history has repeated itself. Total defied US sanctions in 1997 when it signed a $2bn contract with Iran to develop another part of South Pars.
This paved the way for companies including Royal Dutch Shell, Italy’s Eni and Norway’s Statoil to follow suit.
Bijan Namdar Zanganeh, Iran’s oil minister, said at the signing ceremony that he was “thankful to Total for always being a pioneer and coming back to Iran at a difficult time again”.
He added: “I hope this will allay concerns of other companies so that they can enter Iran’s market quickly.”
Some Iranian companies, notably those affiliated to the elite Revolutionary Guards, insist they are capable of developing oil and gasfields with domestic money and expertise.
But the Iranian oil ministry, according to some officials, has been fighting hard to push the guards’ affiliated companies away from big projects including South Pars.
Mr Zanganeh lashed out at those who insist Iran has enough money and expertise to develop the oil and gas sectors. “Which money?” he asked. “There is no money.”
Islamic republic needs investment, but companies want clarity on contract terms
The contract with the Total-led consortium will be consistent with the contentious Iran Petroleum Contract, which serves as a blueprint for deals with overseas energy companies but has sparked a huge row in Iran.
Hardliners believe it is offering overly generous terms to overseas energy companies that can exploit Iran’s natural resources.
Phase 11 of South Pars is estimated to hold 21tn cubic feet of gas, and should produce 2bn cubic feet a day at peak production.
Production is due to begin 40 months after the contract is signed, with Total taking a 50.01 per cent stake in the project, CNPC on 30 per cent and the remainder held by Petropars.
Other European energy companies have expressed an interest in returning to Iran.
However, Shell and BP are being cautious. People familiar with the companies’ thinking said there were two main obstacles to investment in Iran, where both groups have opened offices this year.
The first is the continued existence of US sanctions against Tehran, which requires any business to be done without touching the US banking system. The second is that Iran faces competition from a range of other investment options for the scarce capital being deployed by companies under pressure from weak oil prices.
Industry insiders cited Total’s lack of a significant presence in the US as a factor that made it easier for the French group to blaze a trail back into Iran. US majors and European groups with big US operations, including BP and Shell, would be more cautious because of the continued US sanctions, added the insiders.
The Financial Times
9 October
