If Total Exits South Pars, Its Share Will Go to the Chinese

As Donald Trump prepares to announce his decision on whether to stay in or leave the nuclear deal with Iran by Tuesday night, Iranian officials say that the country's oil and gas sector will continue to develop despite increasing U.S. sanctions. According to the official website of the National Iranian Oil Company, Gholamreza Manouchehri, the company's deputy for development and engineering, emphasized the capability of domestic companies in developing the oil and gas industry, stating, "We acknowledge that we need international companies for investment, but this does not mean that the absence of these companies will halt the development of Iran's oil." On Tuesday, Amir Hossein Zamani-Nia, Iran's deputy oil minister, said during a meeting with a Russian delegation that "whatever the U.S. President's decision tonight, the conditions of Iran's oil industry will not revert to before 2013 and the sanctions era." Three years ago, Iran unveiled a new type of oil contract and hoped to attract $20 billion annually in oil and gas projects, with 80% of that funded by foreign investments. However, so far, only Total of France, which signed a contract to develop Phase 11 of South Pars along with China's CNPC and Iran's Petropars, has brought a small amount of investment into Iran's oil and gas sector. This company has not yet begun development on the project, but Ali Kardar, head of the National Iranian Oil Company, announced this past Sunday that the consortium for developing Phase 11, led by Total, has spent $90 million so far to prepare the project. It is still unclear whether Total will remain in the project if Trump exits the JCPOA. The company has remained silent in response to inquiries from international media, including Reuters, Bloomberg, and the specialized publication Natural Gas World in recent days. Mr. Kardar states that if Total exits the development of Phase 11, its share will go to the Chinese company, and they will not receive any resources. Once the field reaches production, Total can take a percentage from its partner. Total holds a 50.1% stake in this project, while the Chinese company holds 30%, and the remainder belongs to Petropars. CNPC has not yet announced whether it is willing to take Total's share, but according to the contract, any shareholder can transfer their share to their partner. Mr. Manouchehri states that "just as in the previous sanctions period when Western companies left our projects in South Pars, entirely Iranian companies developed these offshore projects and ultimately completed them successfully, we will not face any problems if sanctions are reimposed again." South Pars is divided into 24 phases, with the initial phases launched during Mohammad Khatami's presidency by foreign companies, including Total. However, during Mahmoud Ahmadinejad's presidency, foreign companies exited Iran due to sanctions, and the development of the remaining phases, especially from Phase 10 onward, continued by Iranian companies, albeit with delays and much higher costs. This massive field alone accounts for 70% of Iran's annual production of 215 billion cubic meters of processed gas. Only the development operations for Phase 11 have not yet begun. After the lifting of sanctions, Iran signed a $5 billion contract for the development of this phase with a consortium led by Total. $2 billion of this amount will be used to produce 56 million cubic meters of gas daily and deliver it to the South Pars refineries, following a similar process to the development of other phases of South Pars. However, the significant issue lies in the second part of the project, which is planned for the early next decade and includes the construction of a massive 20,000-ton platform along with several compressors to maintain the gas production level of this phase. It is expected that within the next five years, the pressure in the South Pars field will drop significantly, and the existing 1500 to 2000-ton platforms in this field will need to be replaced with 20,000-ton platforms. The cost of constructing each 20,000-ton platform along with compressors is estimated at about $2.5 billion, which neither Iran nor the Chinese company has the technology to build. Iran hoped that Total would also bring the technology for constructing the first massive platform to Iran. According to Iranian officials, after five years, at least 10 massive platforms will be needed for installation in South Pars to prevent a decline in the field's production. Aside from South Pars, Iran recently signed a $740 million contract with Russian company Zarubezhneft to develop the Aban and Paydar-e Gharb fields. Both fields mentioned have already been developed and are active, but the goal of the new contract is to increase production and recovery rates of these fields. Manouchehri states that a third oil contract will soon be signed, and it is expected that by the end of September or October of this year, the number of signed contracts will reach 10, thus bringing the total value of signed oil contracts between Iran and foreign companies to $40 billion. He did not name the projects or foreign companies, but mentioned that the contract for developing the Farzad B gas field with the Indians has been finalized and will be signed within five months. It is still unclear whether foreign companies, which have been hesitant to invest in Iran's oil and gas sector, will be willing to invest in Iran if the U.S. exits the JCPOA, but part of the delay in entering projects is due to the time-consuming nature of studying oil and gas fields. Iran has signed dozens of agreements with foreign companies for studying oil and gas fields, with some companies recently completing their studies or in the process of completing and submitting proposals to Iran.