Total, CNPC seal $5b gas deal with Iran

French energy giant Total is to sign a $4.8 billion agreement to develop an Iranian offshore gas field, the oil ministry said yesterday, in the biggest foreign deal since sanctions were eased.

At each stage, 2.4 billion US dollars of foreign fund will be allocated for the project, the minister said, adding that Total will operate the SP11 project with a 50.1 interest alongside CNPC with 30 percent and Petropars with 19.9 percent. In other energy futures, heating oil was up 0.6% at $1.49 per gallon while natural gas was 1.6% lower at $2.99 British thermal units. Working with Iran's Petropars, the companies will further develop the country's giant South Pars gas field.

Monday's signing would mark Total's return to Iran, which had the second-largest gas reserves and fourth-largest oil reserves in the world.

Iran expects to produce as much as 56 million cubic meters per day of natural gas from the field once it is in full swing. However, the White House is now in the midst of a 90-day review on whether to uphold the nuclear deal, with some cabinet members showing support for Trump's campaign pledge to renew sanctions on Iran over its nuclear activities. The 20-year deal is the largest since sanctions were lifted against Tehran last year.

Negotiations between Tehran and oil companies have been further complicated by the election of President Donald Trump in the USA who has been very critical of the agreement reached with Iran over its nuclear program in 2015.

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Zamaninia said it was the first deal signed based on the Iran Petroleum Contract (IPC) framework.

European majors are warming to Iran in the post-sanctions environment. Some oil executives said that when traveling to Iran to meet with officials there, for instance, they take only laptops stripped of sophisticated software like encryption programs, and older models of mobile phones, to avoid accidentally violating export controls.

Iran and the five permanent members of the United Nations Security Council - the United States, France, Britain, Russia and China - plus Germany signed the mammoth agreement in July 2015 and started implementing it in January 2016. "The main obstacle is being created by the US government".

A diplomatic crisis in the Persian Gulf is adding another level of uncertainty for big oil companies looking to invest in Iran. The Boeing sales represent the first major deals for an American company in Iran since the 1979 Islamic Revolution and U.S. Embassy takeover.

  • Megan Austin