Total stops Iran gas project as risk from sanctions too high

The French energy giant won’t commit any more funds to the South Pars 11 project

Total SA said it will not risk investing in Iran following the return of US sanctions, unless it can secure a waiver.

Continuing to do business in Iran would be too great a risk as the company has large operations in the US and depends on the country’s banks for financing its operations, Total said in a statement yesterday. So the French energy giant won’t commit any more funds to Iran’s South Pars 11 project, in which it took a controlling stake last year.

The comments from Total — the first Western oil company to sign binding agreements to develop Iran’s oil and gas fields following the end of a previous round of sanctions in 2015 — illustrate the challenge posed by renewed US restrictions. While the French company was speaking about a natural gas project, its reluctance to continue operating there could equally apply to others that rushed back into sectors from automobiles to aviation and engineering to the oil trade.

“The risks of being on the wrong side of the US government are not worth the benefits of trading with Iran once the sanctions are in place,” said Jason Gammel, a London-based analyst at Jefferies LLC. “Oil companies are not going to be able to invest in the upstream sector, traders and purchasers of Iranian crude are going to have to find other sources, or seek an exemption from the US government to be able to continue buying.”

180 days

US President Donald Trump said last week he intends to pull out of an international accord curbing Iran’s nuclear programme.

The US Treasury has given companies up to 180 days to end dealings with Iran. The European Union, also a signatory to the atomic deal, has pledged to take steps to salvage the accord.

Total said it “is engaging with the French and US authorities to examine the possibility of a project waiver.”