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Iran signs massive deal with Total, CNPC for $5bn gas project

by Indrajit Sen on Jul 6, 2017


Total said the contract with NIOC, which has a 20-year duration, with a five-year extension option, is the first Iranian Petroleum Contract (IPC) to be signed.
Total said the contract with NIOC, which has a 20-year duration, with a five-year extension option, is the first Iranian Petroleum Contract (IPC) to be signed.

In a deal that virtually opens up Iran’s oil industry, reeling from the impact of US-led Western economic sanctions, to the world again, the Islamic Republic’s state-owned oil company earlier this week signed a $4.8bn-worth agreement with France's E&P giant Total and Chinese state oil major CNPC to develop its massive offshore natural gas field.

This was the first such deal that Tehran has signed with foreign companies since the landmark 2015 nuclear deal with world powers, although American sanctions continue to be in place and have even been recently reinforced by US President Donald Trump.

In a formal ceremony on Monday in Tehran, officials from the National Iranian Oil Company (NIOC), Total and the China National Petroleum Corporation (CNPC) met and signed the agreement, which will see the French and Chinese companies help NIOC subsidiary Petropars develop a portion of the massive South Pars offshore gas field in the Gulf’s waters, that Iran shares with Qatar.

In a media statement to arabianoilandgas.com, Total said the contract with NIOC, which has a 20-year duration, with a five-year extension option, is the first Iranian Petroleum Contract (IPC) to be signed and is based on the technical, contractual and commercial terms as per the Heads of Agreement (HoA) signed on November 8, 2016.

Since the November 2016 HoA signature, Total has been conducting engineering studies on behalf of the consortium and initiated calls for tender in order to award the contracts required to develop the project by the end of the year.

“This is a major agreement for Total, which officially marks our return to Iran to open a new page in the history of our partnership with the country,” Patrick Pouyanné, Total’s chairman and CEO, has been quoted as saying in the press release.

“We are proud and honoured to be the first international company to sign an IPC, which offers an attractive commercial framework, following the 2015 international nuclear accord (JCPOA) and to therefore contribute to the development of relations between Europe and Iran. Total will develop the project in strict compliance with applicable national and international laws”, Pouyanné reportedly said at the deal signing event.

Total has earned a majority 50.1% share in the new deal with NIOC, while CNPC has won 30% stake of the stake and NIOC's Petropars has retained 19.9 %, meaning Total will be leading the campaign to develop and produce gas from phase 11 of the South Pars field (SP11). The project will require investment estimated at $5bn.

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