CNPC takes over world's largest offshore gas project in Iran with exit from Total

The future of one of the world's largest offshore gas projects – Iran's South Pars phase 11 – is unclear after conflicting reports have emerged from Iran in recent days.

As previously reported, French oil company Total in May said it would pull out of the project due to the US reinstating economic sanctions against Iran. Iran's Islamic Republic News Agency (IRNA) said on Saturday that the Chinese took over the project after Total withdrew.

IRNA said that the Chinese company CNPC "replaced Total in the project for the development of Phase 11 of the South Pars Gas Field, thus its stake in the business increased to up to 80%".

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However, in an article also released on Saturday, Iran, the Iranian government-backed news site that covers the oil and gas industry, said the deal with Total is still in place. Shana quoted Mohammad Mostavafi, director of NIOC, who said: “The members of the consortium in charge of the development of Phase 11 of South Pars will carry out their duties as set out in the provisions of the agreement and to date no modifications have been made to the provisions of the agreement. contract."

This was also confirmed a day later when Shana quoted Shojaoddin Bazargani, Deputy Petroleum Minister for Legal and Parliamentary Affairs, who said that Total had not yet officially withdrawn the project, and that the Iranian Petroleum Ministry would make an announcement if and if that happens “CNPC International has announced that it would exceed Total's share of the contract if withdrawn,” said Shana.

In July 2017, Total and the National Iranian Oil Company (NIOC) signed a contract for the development and production of phase 11 at South Pars (SP11), the largest gas field in the world. Under the agreement, the project should have a production capacity of 2 billion cubic feet per day or 400.000 barrels of oil equivalent per day, including condensate, and the gas produced would supply the Iranian domestic market from 2021.

However, US President Donald Trump said in May that he would cancel the previously signed nuclear deal with Iran, and that he would reinstate all economic sanctions against Iran. The first part of these sanctions, relating to bank financing projects in Iran, took effect last week. (More here).

Following the US government's announcement in May, Total, which was preparing to start awarding equipment and service contracts for the project, said it would pull out amid US sanctions unless an exemption was granted.

We will not risk US dollars

“Total will not be in a position to continue the SP11 project and will have to unwind all related operations before November 4, 2018, unless Total is granted a specific project waiver by US authorities with the support of French authorities. and European. This design waiver shall include protecting the Company from any secondary sanctions under US law,” Total said.

Total said it would not risk the loss of US bank dollar financing for its worldwide operations (US banks are involved in over 90% of Total's financing operations), the loss of its US shareholders ( US shareholders represent more than 30%). Total's share) or the inability to continue its US operations (US assets represent over $10 billion of capital employed). ”

“Under these circumstances, Total will not undertake any further commitments related to the SP11 project and, in line with its contractual commitments with the Iranian authorities, will be engaging with French and US authorities to examine the possibility of a project waiver.”

Trump: choose between USA and Iran!

According to the Iranians, Total is still the operator of the SP11 project with a 50,1% stake along with Chinese state oil and gas company CNPC (30%), and Petropars (19,9%), a wholly owned subsidiary. from NIOC, however, it remains to be seen whether the current shareholding spread will remain in effect or whether the CNPC will take over. US President Trump last week signed the executive order introducing the first round of sanctions against Iran. He then, in a tweet, warned the partners that they would have to choose between Iran and the US.

“Iran sanctions have officially been released. These are the most severe sanctions ever imposed, and in November, they increased further. Anyone who does business with Iran will NOT do business with the United States,” he said. The executive order reinstates sanctions on all persons who provided support or goods or services for Iran to acquire US banknotes, effective Aug. Sanctions related to the oil industry will take effect in November.

Trump has authorized the Secretary of the Treasury to impose sanctions on a foreign financial institution that facilitates a significant financial transaction, effective November 5, 2018, for the purchase, acquisition, sale, transportation or marketing of oil or oil products from Iran; or for the purchase, procurement, sale, transport or marketing of petrochemical products from Iran.

China: Business as usual with Iran

It has been reported that the US wants to bring Iranian crude oil exports to zero. However, this is unlikely to happen. Unlike Total, the Chinese have no funding problems and have dropped US calls for everyone to halt imports of Iranian oil.

Asked recently whether China would follow the US call for a halt to imports of Iranian oil, the Chinese Foreign Ministry spokesman said: “We have answered similar questions many times. China and Iran, under the precondition of not violating their respective international obligations, maintained normal exchanges and cooperation.

“This is reasonable, legitimate, lawful and beyond reproach. Meanwhile, China always opposes unilateral sanction and "long-arm jurisdiction". China's legitimate rights and interests must be upheld. This position is firm and clear”.

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