Total SA has signed a preliminary agreement to help develop the massive South Pars natural gas field offshore Iran. The pending transaction marked the first Western energy investment in Iran since international sanctions were lifted earlier this year.
Terms call for Total, China National Petroleum Corp., and Iran’s state-owned Petropars to develop the South Pars Phase 11 (SP11) project, which will have a production capacity of 1.8 bcfd. The produced gas will be fed into Iran’s gas network. Iranian government officials expect the deal to be finalized in 9 months.
Total will operate the project with a 50.1% interest. CNPC will take 30% interest. Petropars will hold the rest. Total said it will avoid US sanctions on Iran by using its euro-denominated cash to finance the deal.
Initial plans call for the SP11 project to be developed in two phases. The first phase, with an estimated cost of $2 billion, will consist of 30 wells and 2 wellhead platforms connected to existing onshore treatment facilities by 2 subsea pipelines.
“Following Total’s successful development of Phases 2 and 3 of South Pars in the 2000s, the group is back to Iran to develop and produce another phase of this giant gas field,” said Patrick Pouyanne, Total chairman and chief executive officer.
“Total will develop the project in strict compliance with national and international laws,” he said.
“This project fits with the group’s strategy of expanding its presence in the Middle East.”
Terms call for project partners will conduct exclusive negotiations to finalize a 20-year contract within the framework of Iranian Petroleum Contract recently approved by the Iranian Parliament.
In parallel, Total will launch engineering studies and a call for tender process so that construction contracts can be awarded immediately upon signature of the final agreement.
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