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Iran: South Pars Phase 11 Contract Unchanged

Aug 13, 2018, 7:12 AM
News ID: 26418
Iran: South Pars Phase 11 Contract Unchanged

EghtesadOnline: The agreement to develop South Pars Gas Field's Phase 11 in the Persian Gulf with France’s Total and China National Petroleum Corporation has not undergone any changes yet.

Mohammad Mostafavi, director of investment at Iran’s National Iranian Oil Company, told Shana, the Oil Ministry's news agency.

The official made the statement hours after IRNA quoted Mostafavi as saying CNPC had taken Total’s share in the multibillion dollar project.

“The role of the members of the consortium undertaking the venture is based on the terms of the deal and there have been no changes yet,” Financial Tribune quoted him as saying.

Total clinched an agreement in 2017 to develop Phase 11 with an initial investment of $1 billion, marking the first major western energy investment in the country after sanctions were lifted in 2016. 

But the French firm had said it would stop unless it secured a US sanctions waiver, and Gholamreza Manouchehri, deputy head of NIOC, said in June that if Total abandoned the contract, CNPC would conduct the $5 billion project.

US President Donald Trump unilaterally abandoned Iran's nuclear deal in May. 

Total, CNPC and Iran’s Petropars hold a 51%, 30% and 19% stake in the project respectively. 

The French firm planned an initial investment of $1 billion for Phase 11, with the aim of eventually producing 2 billion cubic feet a day, or 400,000 barrels of oil equivalent a day, including condensate, the company said in a statement in July 2017. 

CNPC has been active in Iran since 2004, operating in oil, gas and oil-field services, according to the company’s website. In 2006, it was awarded a three-year contract to provide offshore well-logging and other services at South Pars.

-----Zero Flaring

According to Mostafavi, in line with policies to reach zero gas flaring at Iran's refineries mostly located in the southern Khuzestan Province, NIOC is expected to sign contracts with the Persian Gulf Petrochemical Industries Company as well as Maroun Petrochemical Company.

"The deals, which entail the completion of 30 projects in two years are stepping stones for curtailing gas flaring in oilfields controlled by the National Iranian South Oil Company," he said.

"The venture will not only provide feedstock for the under-construction Bid Boland-2 Gas Refinery in Khuzestan Province, but also increase NISOC's liquefied gas output."

Asked about Kharg natural gas liquids (NGL) project, the official noted that the initial plan, which called for collecting 16 million cubic meters of natural gas at a cost of $4.7 billion, was not economically feasible, hence another contract was signed to collect 8 mcm of gas worth $913 million.

"Close to 42 billion cubic meters of gas are flared in the country daily," he said.

Flaring is the practice of burning gas deemed uneconomical to collect and sell. It is also used to burn gases that would otherwise present a safety problem.

Giving a breakdown, Mostafavi noted that East Karoun, Masjed Soleiman, Kharg, West Karoun and Ilam account for 20 mcm, 3 mcm, 8 mcm, 7 mcm and 5 mcm of the total natural gas that is burnt respectively.

For years, Iran has struggled to curb the burning of huge amounts of associated petroleum gas, which could have a more damaging and irrevocable impact in the long run compared to one-off spills.

In 2017, Iran's Parliament signed into law a bill to curb the flaring of natural gas to 10% or lower by 2021. 

Oil- and gas-rich Iran is committed to a global pact to move away from fossil fuels with the goal of limiting a rise in average global temperatures to well below 2 degrees Celsius.

An estimated 3.5% of the world’s natural gas supplies were wastefully burned at oil and gas fields in 2012, British scientific journal 'Nature' reported last year, citing estimates from satellite data.