(EnergyAsia, July 3, 2017, Monday) — Iran has signed a landmark US$5 billion agreement with France’s Total and China National Petroleum Corp (CNPC) to jointly develop phase 11 of its hugely coveted South Pars natural gas field.


Total, the operator with a 50.1% share, and CNPC which has a 30% stake, are the first foreign companies to be awarded the rights to help develop the massive field since Iran concluded an agreement with six world powers over its controversial nuclear programme in 2015. Petropars Group, a subsidiary of state-owned National Iranian Oil Company (NIOC), holds the remaining 19.9% stake in the Persian Gulf project that calls for the development of 20 wells, two wellhead platforms, and underwater pipelines.

The contract was signed in Tehran on July 3 at a ceremony attended by Iranian Oil Minister Bijan Namdar Zanganeh, senior government officials, and executives of the three companies and their contractors.

Total said the project will have a production capacity of two billion cubic feet per day or 400,000 barrels of oil equivalent per day including condensate.

Under the terms of the 20-year contract, the consortium will supply the natural gas for Iran’s domestic consumption from 2021.

Describing it as a “major agreement” marking Total’s return to Iran since 2006, chairman and CEO Patrick Pouyanné said:

“This project is in line with the group’s strategy to expand its presence in the Middle East and grow its gas portfolio by adding low cost, long plateau assets.”

 

Deal marks victory for Rouhani government

 

Significantly, the contract was signed amid a redrawing of political alliances in the Middle East with Iran supporting Qatar in its dramatic and hostile split from Saudi Arabia and other Arab countries.

 

Iran’s South Pars and Qatar’s North Dome form two sections of the same giant gas field covering an area of 9,700 sq km.

 

Energy consulting firm Wood Mackenzie said the deal is a victory for the government of President Hassan Rouhani in bringing foreign investors back to Iran’s neglected hydrocarbon sector. The country’s economy and infrastructure have deteriorated from over a decade of political and economic sanctions that the West has imposed on Iran for persisting with its nuclear energy programme that some believe is used to develop weapons of mass destruction.

 

“This deal is the result of four years of hard work for Rouhani’s administration. Rouhani and the negotiating team, led by oil minister Bijan Zanganeh, have successfully brought IOCs back to Iran’s upstream for the long term,” said Homayoun Falakshahi, Wood Mackenzie’s senior research analyst for the Middle East.

 

“The South Pars Phase 11 deal will prompt other international oil companies to re-enter the country’s upstream sector. Reopening the Iranian upstream to foreign investors could very well become one of Rouhani’s main economic achievements.”

 

Calling it a “huge day” for Iran, Falakshahi said the project opens a new chapter for South Pars and sets the stage for the field’s future development. Phase 11 alone could lead to the recovery of more than 10 trillion cubic feet of low-sulphur gas and 450 million barrels of condensate