Iran-Total Gas Deal Cleared by State Supervisory Entities

EghtesadOnline: T ehran's milestone gas deal with French energy company Total has got the green light from all the necessary bodies and authorities, the rapporteur of Majlis Energy Commission said in a statement on Monday.

News ID: ۷۷۸۴۵۴

16 August 2017

The French oil and gas major struck a $4.8 billion deal last month to develop Phase 11 of the giant South Pars Gas Field. The agreement came against the nitpicking of domestic stakeholders and authorities while supervisory bodies have continued to scrutinize the deal in the weeks after it was signed on July 3.

"The contract with Total has passed all the necessary legal and supervisory steps," Asadollah Qarekhani was quoted as saying by the National Iranian Oil Company's news portal on Monday.

He added that the gas deal has been endorsed by the Supreme Supervisory Board of Oil Resources as well as a board that was recently established by the government to oversee and identify irregularities in new oil and gas contracts, Financial Tribune reported.

The statements indicate that the road is virtually clear for Total to become the first major western company to successfully return to Iran's energy industry after the lifting of economic sanctions against Tehran in early 2016.

"Supervision is not confined to the time before signing the contract … All the pertinent bodies will continue to oversee the deal's execution," Qarekhani said.

"Negotiations over the South Pars project lasted for about 18 months," Patrick Pouyanne, chief executive officer of Total, said after signing the SP Phase 11 deal in Tehran.

But the venture and its contractual framework, known as Iran Petroleum Contract, have long been subject to criticism from opponents of President Hassan Rouhani and his pro foreign-investment administration.

The government says a key advantage of IPC is the obligation of foreign contractors to choose and work alongside Iranian firms in an effort to acquire cutting-edge technical and managerial know-how.

In the case of the Phase 11 project, state-owned company Petropars will work as the Iranian partner of the venture along with China's CNPC. Petropars is the largest Iranian exploration and production company.

Opponents of the deal have raised questions about Total's murky financial records in Iran. According to reports, Total had paid bribes in the 1990s and early 2000s to secure oil and gas contracts in Iran.

Oil Minister Bijan Namdar Zanganeh said in July that Total will not be remunerated before production begins at Phase 11.

"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," he said in a parliamentary hearing on the gas deal with Total last month.