Total and CNPC sign Iran South Pars deal

THE National Iranian Oil Company (NIOC) has signed an agreement with Total, China National Petroleum Corporation (CNPC), and its own subsidiary Petropars to develop phase 11 of the South Pars gas field (SP11) in the Persian Gulf.

SP11 will have a production capacity of 1.8bn ft³/d of natural gas, which will be fed into Iran’s gas network. Under the terms of the heads of agreement, NIOC and the consortium will now carry out exclusive negotiations to finalise a 20-year contract to develop SP11. Total, which will be the operator of SP11 with a 50.1% interest in the project, will launch engineering studies and a call for tender during the talks, to ensure that contracts can be awarded as soon as the final agreement is signed. This is expected in 2017. Petropars will have a 19.9% stake in SP11 while CNPC will hold 30%.

The project will be developed in two stages. The first, costing up to US$2bn, will include two wellhead platforms, 30 wells and two sea lines to existing onshore gas processing plants. During the second stage, which could cost a further US$4bn, the consortium will design and install offshore compression facilities to maintain production levels.

Patrick Pouyanné, Total chairman and CEO, said that Total’s selection by NIOC is recognition of its technical expertise and the partnership Total has built up with Iran over the years.

“Total will develop the project in strict compliance with national and international laws and looks forward to working alongside the Chinese state-owned company CNPC in this additional international partnership. This project fits with the group’s strategy of expanding its presence in the Middle East, where the origins of the group lie, and growing its gas portfolio by adding low unit cost, long plateau gas assets,” he added.

Total was responsible for South Pars phases 2 and 3, having been awarded the contract in 1997, and had previously agreed to develop SP11, but in 2008, it pulled out of that initial deal fearing political reprisals due to international sanctions against Iran. However, with the lifting of those sanctions earlier this year, it is likely that this heads of agreement, the first such major deal in Iran since then, will mark the beginning of the return of international oil and gas majors to the country.