Iran to sign $4.8bn deal with France's Total

02 July 2017

Preliminary agreement on the world’s largest gas field was signed last year

Iran is set to sign an estimated $4.8bn gas development contract with France’s Total on 3 July, marking the first major energy investment deal concluded in the Islamic Republic since nuclear-related sanctions were lifted in 2016.

“The international contract for development of Phase 11 of South Pars in the framework of IPC (Iranian Petroleum Contract) will be signed on Monday, July 3, at 14:30, at a ceremony in Tehran attended by Iranian Oil Minister Bijan Namdar Zanganeh and senior officials from France’s Total, China’s CNPC and Iran’s Petropars,” an unnamed oil ministry official was quoted as saying by news agency Reuters.

In November, Total along with CNPC and Petropars signed a heads of agreement - the first of its kind for Iran - with the National Iranian Oil Company to develop the eleventh phase of the offshore gas field, which is the largest in the world.

Phase 11 of South Pars will have the capacity to produce 1.8 billion cubic feet a day (cf/d) of gas to be fed into Iran’s gas network.

The project will be the first to be signed under the terms of the IPC, and the parties will likely finalise a 20-year contract.

Total will take a 50.1 per cent interest in the project, with CNPC holding 30 per cent. The remaining 19.9 per cent will be held by PetroPars, which has been working on phase 11 for several years and is also carrying out other phases of the South Pars megaproject.

Total, said last year that it would launch engineering studies and initiate the tender process so that construction contracts can be awarded immediately upon signature of the final agreement.

South Pars phase 11 will be developed in two phases. The first, with an estimated total cost of about $2bn, will consist of 30 wells and two well-head platforms connected to existing onshore treatment facilities by two subsea pipelines. At a later stage, a second investment phase involving the construction of offshore compression facilities, will be launched once required by the reservoir conditions, Total said.

Iran is looking to prioritise production of liquefied natural gas (LNG) with the help of foreign investment. It has set a target of increasing gas production to 10 per cent of totwl world production by 2025 from its current share of one per cent.

It was reported in February that Total was interested in reviving Iran’s stalled LNG project at Tombak. The 10.8 million tonnes a-year facility near Assalouey was under construction when sanctions halted further development in 2012.

Iran currently has no functional LNG plant. Much of Iran’s 202.4 billion cubic metres of gas output is consumed domestically. Around 7.7 billion cubic metres is supplied to Turkey annually through a pipeline. Azerbaijan and Georgia also receive pipeline gas in exchange for supplying electricity to Iran. Plans are underway to extend pipeline supply to Georgia this year. Gas exports to Iraq also resumed this month.

The South Pars field development is the most important energy project in Iran, both in terms of size and the strategic value to the country. The offshore field accounts for 40 per cent of Iran’s gas reserves and more than 40 per cent of the country’s total gas production.

The field was discovered in 1990 and is located about 100 kilometres off the Iranian coast. The asset, which spans Iranian and Qatari borders, is in 65 metres of water and located 3,000 metres below the seabed.

The total field covers an area of 9,700 square kilometres, with 3,700 sq km located in Iran, and the remaining 6,000 sq km located in Qatar’s territorial waters.


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