Ministry Downplays Sanctions Impact on New Oil, Gas Deals

EghtesadOnline: Securing the 20-year deal with French oil and gas major Total as well as China's CNPC to develop Phase 11 of the South Pars Gas Field in the Persian Gulf shows that Iran has normalized its relations with the world and the prospect of the return of sanctions is very unlikely, the deputy oil minister for international affairs said.

News ID: ۷۴۲۶۲۸

10 July 2017

"Our country has no choice but to compete with rivals to attract as much foreign investment as possible," Amirhossein Zamaninia was also quoted as saying by Mehr News Agency on Saturday.

"International funding is limited. Nonetheless, having access to some of the world's largest oil and gas reserves can motivate multinationals to transfer much-needed technical know-how to the country," Zamaninia said, adding that Iran can and should conclude more foreign agreements to develop hydrocarbon depositors, especially joint oil and gas fields.

Asked about the probability of a potential return of US sanctions against Iran under US President Donald Trump, he said an appropriate course of action has been anticipated in case Iran's nuclear deal, officially known as the Joint Comprehensive Plan of Action, is breached by western signatories. He did not elaborate, according to Financial Tribune.

Pointing to Total's assessment of all the risks prior to signing the deal, Zamaninia said, "If they were unsure about the low risk of working in Iran, they would never make such a substantial investment."

Attaching great importance to the presence of domestic firms in ventures with foreign majors, such as the role of Petropars as a partner in the South Pars Phase 11 project alongside Total, the official noted that Petropars will have a 19.9% stake in the gas development project, standing at $1 billion that is crucial to convince energy giants to transfer their capital to Iran.

Zamaninia says, "As long as domestic companies are not willing to invest in internal projects, international companies will never take such a risk to jeopardize their money."

Rejecting claims that Iran's mega oil and gas initiatives can be developed without foreign investment, he said, "If it were not for the nuclear deal, implementing projects such as Phase 11 would have cost at least 40% more."

Referring to the cost of drilling a well under sanctions at $40 million, he noted that the same operation will be completed at $24 million at present.

The National Iranian Oil Company and Total S.A. concluded a $5 billion deal in Tehran this month to develop Phase 11 of the South Pars Gas Field.

According to Oil Minister Bijan Namdar Zanganeh, serious negotiations are also underway to develop Iran's hydrocarbon deposits, especially joint fields, including Azadegan, Yadavaran and Yaran, major oilfields in the oil-rich Khuzestan Province.

Zanganeh has already made it clear that it is very unlikely Total 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.

Total's investment return during 20 years will amount to a maximum of $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.