Total halts $2 billion gas project in Iran


Total halts $2 billion gas project in Iran

Andrew Cummings
May 17, 2018

French oil major Total has halted plans to help develop Iran's giant South Pars gas field as it seeks to clarify whether the investment can avoid falling foul of returning United States sanctions on Tehran, the oil company said Wednesday.

Companies are starting to take matters into their own hands as European and some other governments struggle to save an worldwide nuclear deal with Iran after the United States withdrew and said it would reinstate sanctions on Tehran.

Complete began the South Pars 11 challenge in July 2017, two years after Western powers signed a nuclear take care of Tehran prompting the return of many companies to Iran.

The nuclear agreement, worked out by the U.S. under former President Barack Obama, together with five other world powers and Iran, lifted sanctions on Iran in exchange for limits on its nuclear programme.

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Total also confirmed it is lobbying authorities in both Paris and Washington for a waiver to the United States sanctions which are due to come into effect November 5.

The French company said it had so far spent less than 40 million euros ($47 million) on the South Pars project, and that pulling out of it would not impact the company's general production growth targets.

When the Iran agreement was signed and sanctions were ended, Total was among the first corporations to sign business agreements with the Iranian government.

Total's withdrawal would be a blow to President Hassan Rohani, who had hoped its prestigious project would make other global businesses regain confidence in Iran and bring in investment. "It's a way to give businesses a chance to get out".


Total said the South Pars project puts at risk the company's large operations in the United States and reliance on USA banks for financing of 90 percent of its operations. Its partners in the project are Chinese state oil company CNPC, and Iran's Petropars.

"The risks of being on the wrong side of the USA government are not worth the benefits of trading with Iran, once the sanctions are in place", said Jason Gammel, an analyst at Jefferies LLC.

If they are not exempted from the sanctions, Total stated that it will leave Iran by November 4, 2018.

Another Danish oil tanker operator Torm has said it would stop taking new orders in Iran.


European Commission head Jean-Claude Juncker presented options to protect European investment, which include retaliatory sanctions, allowing the European Investment Bank to invest in Iran, and providing euro-denominated credit lines for Iran. However, officials with the company state that they will have to walk away from the project if they are not exempted from the new USA sanctions.

Companies are starting to take matters into their own hands as European and some other governments struggle to save the Iran deal.

Total's position shows how hard it will be for European powers to safeguard their interests inIran and offer guarantees to save the nuclear deal.

Iran's oil minister Bijan Zanganeh said on May 16 that Tehran would survive the renewed sanctions.


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