Energy Company May Withdraw from Iran South Pars Project

Marco Green
May 17, 2018

French oil major Total warned on Wednesday it will abandon a major gas field project in Iran unless it is exempt from U.S. sanctions against Tehran.

Total was the furthest advanced of its European oil major peers in a cautious feeling out of upstream opportunities in Iran since the easing of global sanctions at the start of 2016.

The US decision to withdraw from the nuclear deal between Iran and an alliance of western powers was taken earlier this month, despite opposition from France, Germany and the United Kingdom, and threatens a huge swathe of global business deals.

The group mentioned it has $10 billion of capital employed in its U.S. belongings, and United States banks are concerned in 90 % of its financing operations, making Complete extremely weak if focused by any USA actions.

For the French company to stay, a project waiver would have to protect the company from "any secondary sanction as per USA legislation", it said.

Complete began the South Pars 11 challenge in July 2017, two years after Western powers signed a nuclear take care of Tehran prompting the return of many companies to Iran.

The Phase 11 contract will automatically go to Total's consortium partner China National Petroleum Corporation (CNPC) and local player Petropars if the French player does pull out, Iranian officials have previously said.

Determined to keep the accord alive, European leaders need to find a way to assure companies that their investments are beyond Washington's extra-territorial reach.

Total's announcement comes after German insurer Allianz (ALVG.DE) and Danish oil product tanker operator Maersk Tankers said they were winding down their businesses in Iran.

The oil company said USA institutions were involved in 90pc of its financing operations, and make up 30pc of its shareholder base. "With that in mind it's a logical decision", a European diplomat said of Total's decision.

TOT says it has spent less than 40M so far on the project and that a withdrawal would not affect its 5% compound annual growth rate target during 2016-22.

Total said it would not be making any further commitments towards the Iranian South Pars project for now, and added it was engaged with French and U.S. authorities over the possibility of a waiver to the project.

Industry sources told Reuters this week that CNPC was ready to take over Total's stake project if it pulled out. Russian Federation has also said it remains committed to the deal.

Other reports by Click Lancashire

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