Total may let go of Iran gas to avoid US sanctions
French oil major Total may have to consider options to sell its stake in a $4.8 billion Iranian gas deal to its partners to avoid being slapped with US sanctions following the Trump administration’s withdrawal from the Iran nuclear deal, analysts said.
Total has a 50.1 per cent stake in the 20-year South Pars project, alongside China National Petroleum, which holds a 30 per cent and Iran’s Petropars with a 19.9 per cent stake.
“Total would require applying for the US sanction exemption. However, approving such an exemption by the US treasury seems unlikely and Total will very likely have to pull out of the South Pars Phase 11 project and pass its share to CNPC,” said Siamak Adibi, head of Middle East gas team at consultancy FGE. “However, CNPC will also likely comply with the US sanctions and will either withdraw or play for time.”
On Wednesday, Total said in a statement that it would “unwind all related operations” before the 180-day period indicated by the Trump administration for companies to stop engaging with Iranian entities, following the US exit of the Joint Comprehensive Plan of Action on May 8.
Total said it would await “a specific project waiver” from US authorities as nearly 90 per cent of its financing came from US banks.
“Their stake will go to CNPC and behind the curtains, there may be a possibility of Total having the option to come back, if the situation changes,” said an analyst who did not wish to be named.
A full exit was unlikely, he added, saying that the possibility of Donald Trump’s failure to get re-elected for a second term as the US president would incentivise the French oil company to find a way back to its current interests in developing phase eleven of South Pars, the world’s largest gas field, which Iran shares with Qatar.
Total chief executive Patrick Pouyanne had said in an interview with The National in February that should the US not sign a waiver on the company’s interest in the project, they would seek to benefit from a “grandfather clause” as the scheme had been awarded two years prior to the collapse of the Iran nuclear deal.
Total’s possible exit from Iran comes as a massive blow to Iran’s slowly resurgent energy industry, which had looked to the JCPOA as a lifeline to push ahead with much needed foreign investment and expertise.
Iran is home to the world’s largest reserves of gas and is the Middle East’s third-largest oil producer. Post-EU sanctions, Iran managed to reinstate its production capacity to pre-sanctions levels and had boosted its exports.