Zanganeh Says Total Unfazed by Sanctions

EghtesadOnline: Oil Minister Bijan Namdar Zanganeh said the French oil major Total will develop Phase 11 of the South Pars Gas Field in the Persian Gulf step-by-step because of the nature of the initiative and "that is why the whole $5 billion investment will not be transferred to the country all at once".

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09 July 2017

"The gradual transfer of the much-needed capital has nothing to do with the prospect of the snapback of sanctions. It is wrong to interpret it (Total's gradual investment in South Pars) as a precautionary measure," Zanganeh was quoted as saying by Mehr News Agency on Saturday.

"Sanctions do not directly affect the parties involved in the Phase 11 project," he added.

Patrick Pouyanne, chief executive officer of Total, had previously cast doubt on the gas deal with Tehran when he said in February that the French major was waiting for an extension of the waiver on US sanctions against Iran, according to Financial Tribune.

Asked about the possibility of Total's procrastination in case new sanctions are imposed against Iran, Zanganeh said, "It is very unlikely that they abandon the project before completion. Based on the terms of the contract, Total's revenue is contingent upon gas production from Phase 11. Therefore, as long as the project is not fully implemented, they will earn no money."

Pointing to the fact that development of the second part of phase 11 will begin after the gas reservoir registers a drop in pressure, the minister said, "The French giant does not need to inject all the funding for Phase 11 at the same time."

According to Zanganeh, Total's investment return during 20 years will amount to a maximum $12 billion. Iran's revenue from South Pars Phase 11 is estimated to reach $84 billion, as long as oil prices do not fall below $50 a barrel.

The National Iranian Oil Company and Total S.A. signed a $4.8 billion deal to develop Phase 11 of the South Pars Gas Field last week in Tehran. But officials forecast costs could exceed $5 billion.

------ Economic Development

Total's new deal with Iran is aimed at producing natural gas for consumption inside Iran, Pouyanne said in an interview with Bloomberg on the sidelines of a business conference in the southern French city of Aix-en-Provence on Friday.

"We are contributing to the economic development in Iran and I think this is exactly the spirit of the business agreement," Pouyanne said.

Asked about his concerns over a potential return of US sanctions against Iran under US President Donald Trump, he added, "The contract was finalized in compliance with current international rules. We respect international rules. If the rules change, we have to adapt ourselves."

Pouyanne believes that there is a clear disconnect today between political tensions and the economics, and states do not use business opportunities to try and escalate tensions.

"I am Qatari in Qatar, Emirati in the Emirates, Iranian in Iran, that's our philosophy," he said, noting that he does not have to choose between the countries.

"Total is in the Middle East to build bridges, not walls, as it is the best contribution to bring peace through economic development," said the 54-year-old manager of the world's fourth-largest oil and gas company.

--- Azadegan Tender

Zanganeh also elaborated on a tender for Azadegan project, a huge gas reservoir that is divided into the northern and southern sections with an estimated 33 billion barrels of in-place crude.

"The tendering process is now underway and no speculation on which foreign or domestic company stands a better chance to win the field's development rights is valid at the moment," he said, NIOC's news portal reported.

Zanganeh also noted that the competing companies, both foreign and domestic, have been invited at two levels of leaders and companions.