Total's $1 Billion Investment in South Pars Gas Field

French oil and gas company Total announced that it will advance the development project of Iran's South Pars gas field with a $1 billion investment this summer. Patrick Pouyanné, CEO of Total, stated in an interview with Reuters that following the extension of the lifting of sanctions on Iran by the United States, the company will invest $1 billion in this project. He said, 'This (project) is worth the risk of a $1 billion investment because it creates a very large market. We are fully aware of some risks and have considered the possibility of the return of sanctions. We also need to consider regulatory changes.' The offshore South Pars gas field, located in the Persian Gulf and shared between Iran and Qatar, was discovered in the 1990s, and Total was one of the main investors in Iran until sanctions were imposed in 2006 due to its controversial nuclear program. Total has decided to return to Iran and undertake the development of Phase 11 of South Pars, which costs over $5 billion. Total is one of the largest oil and gas producers in the world. Due to uncertainty regarding contractual conditions and a sharp decline in global oil prices, most major international companies, including Royal Dutch Shell and BP, show little interest in investing in Iran. Despite the extension of the lifting of sanctions against Iran by the U.S. in May, Donald Trump's strict policies have created a chaotic investment environment in Iran. According to Total's CEO, the lifting of sanctions has been extended and will be renewed every six to eight months, but there is still a degree of uncertainty. Based on a memorandum of understanding signed last year, Total will hold a 50.1% stake in the development project of Phase 11 of South Pars. China National Petroleum Corporation and Iranian Petropars hold 30% and 19.9% stakes in this project, respectively. Foreign investors were dissatisfied with the low profits they received from previous contracts in Iran. Total had worked on the development of Phases 2-3 of South Pars in the 1990s. Reuters quotes Pouyanné stating that the new model of Iran's oil contracts offers profits based on production rather than a fixed percentage based on development costs. Considering that U.S. sanctions prohibiting trade with Iran in dollars are still in effect, Total will carry out this project in euros and with its own financial resources. Iran emphasizes that the development plan for South Pars will not be affected by the severance of diplomatic relations between Qatar and Saudi Arabia and some Gulf countries. Pouyanné added that Total is also considering a petrochemical project in Iran that requires financing from Asian banks. Meanwhile, according to IRNA, the National Iranian Oil Company and Italy's Eni signed a memorandum of understanding on Tuesday, June 30, in Tehran for the study of the development of the Darquain oil field in southwestern Iran and Phase 3 of the Kish gas field in the Persian Gulf. In this context, Qatar is seeking to develop South Pars 'with the aim of increasing gas production by 10%.' The opening of five phases of South Pars has 'surpassed Iran's production capacity' compared to Qatar. A $13 billion financing deal from South Korean companies for Iran has been finalized. The approval of five other foreign companies for the development of Iran's oil fields has been confirmed.