China’s CNPC company replaced Total in the project for development of Phase 11 of South Pars Gas Field (SP11), thus its stake in the deal rose to as much as 80 percent, Iranian state media reported on Saturday.
“China National Petroleum Corp (CNPC) has replaced Total of France with an 80.1 percent stake in the phase 11 of the South Pars (gas field),” state media quoted Mohammad Mostafavi, director of investment of Iran’s state oil firm NIOC, as saying.
There was no immediate confirmation of today’s state media report by CNPC, which earlier held a 30 percent stake in the project and has now taken over Total’s 50.1 percent share. The remainder is held by Iran’s Petropars.
In July 2017, National Iranian Oil Company (NIOC) and the International Consortium, headed by Total, signed an oil deal in the post-sanction era to develop phase 11 of South Pars. If completed, the project will generate 56 million cubic metres of natural gas per day. South Pars has the world’s biggest natural gas reserves ever found in one place.
As per the contract, CNPC of China and Iran’s Petropars were other members of the international consortium.
Total stake in the project was 50.1 percent, while that of CNPC and Petropars were 30 percent and 19.9 percent, respectively.
After US unilateral exit from the July 2015 nuclear deal between Iran and the six world powers- US, UK, France, Russia, China and Germany- Washington put restrictions on several world companies and banned them from cooperating with Tehran. Many world powers, including Russia, China, and the European Union (EU) are against US withdrawal.
Tehran set a two-month deadline for French oil and gas company Total to hold talks with the US on whether it can stay in Iran or not, the Iranian petroleum minister Bijan Zangeneh announced in May. If Total decides to leave the Phase 11 of development project on Iran’s supergiant South Pars gas field, the country will substitute China’s CNPC for the French company, Bijan Zangeneh said.
Zangeneh further noted that in the event of Total withdrawal from the agreement, it will not be fined, but the investment it has so far made in the project will not be repaid until full implementation of the project.
Total has spent $90 million to help develop the offshore field and won’t be compensated before production begins, Ali Kardor, managing director of state-run NIOC, said in May.
On May 16, Total announced that it might pull out of its investment in the South Pars gas field if it cannot secure a waiver from the US government.
Total has not said what it would do with its stake should it pull out, and it has until Nov. 4 to wind down its Iran operations.
This week, the first batch of US sanctions against Iran, previously lifted under the 2015 nuclear deal, came into effect.
The renewed U.S. sanctions were among those lifted under a 2015 deal between world powers and Tehran on curbing Iran’s nuclear program. U.S. President Donald Trump abandoned the deal in May. Washington is planning to impose heavier sanctions in November aimed at Iran’s oil sector.
The implementation of the US restrictive measures against Tehran prompted large European companies, such as France’s oil major Total and its carmaker Renault to suspend plans to invest in Iran, opening up opportunities for Tehran’s Eastern partners, such as China, India and Russia.
To protect European companies conducting business with Iran from US sanctions, the EU has developed an updated version of the Blocking Statute, which was first used to counter US sanctions on Iran, Libya and Cuba. The legislation allows European businesses to not comply with US measures against Iran, by, for example, trading in non-dollar denominated currencies, so they do not risk being penalized by Washington. However, analysts warn that large companies are unlikely to take the risk since the benefits of trade with Washington outweigh the prospects of doing businesses with Tehran.