LONG WAIT FOR TOTAL TO BE PAID FOR IRAN GAS PROJECT
▶ French company has exited South Pars field following US sanctions
Iran will be not be in a position to refund French oil major Total for its investment in South Pars, the world’s largest gas field, until the project is operational, said the country’s oil minister.
Total, “was not expected to pay a fine” to Iran, after it withdrew from a $4.8 billion venture to develop phase 11 of the gas field last month, as a result of US imposing sanctions against Tehran, Bijan Zanganeh was reported saying by Icana, the state-backed news agency.
The French oil producer’s joint investment with China National Petroleum Corporation and the local Petropars in 2016, following the lifting of nuclear-related sanctions against Tehran, was seen as a big win for the beleaguered Iranian energy sector.
Iran has the world’s second-biggest gas reserves after Russia. However, an ageing infrastructure combined with lack of access to latest technology in gas processing under sanctions, has stunted the growth of the industry.
The country had banked on the re-entry of companies such as Total to boost gas production to become self-sufficient – Iran is forced to import from neighbouring Azerbaijan and Turkmenistan during winters – as well as become an exporter of liquefied natural gas in the near future.
Total has spent $55 million in administration costs, design as well as launching tenders on the project, which it will be unlikely to recover any time soon, according to estimates by energy consultancy Wood Mackenzie.
Homayoun Falakshahi, a senior upstream analyst at the consulting firm in Edinburgh, said any dues owed to Total would have to come from revenues generated from the project.
However, should CNPC, its partner on the project, takeover as lead, the two companies may reach a settlement on partial or total recovery of cost.
Another analyst, who spoke on condition of anonymity said the terms of the project going forward as well as that of Total’s exit remained uncertain.
However, while the French company is excused from penalties in Iran, it will be unable to recover its capital expenditure for the foreseeable future, and not until the project is fully operational, he added.
Total, which has significant gas expertise, was expected to bring its technical capabilities to develop the project alongside its partners, who would now find it challenging to develop the field on their own.
The development of phase 11 was divided into two stages. First involved a simpler process for pumping gas but the second required more complicated technology, for which Total’s involvement was integral.
Total, which has significant gas expertise, was expected to bring its technical capabilities to develop the project