Energy Company May Withdraw from Iran South Pars Project

by Ben Pena May 17, 2018, 14:36
Energy Company May Withdraw from Iran South Pars Project

Yesterday, Total announced its intention to pull out of Iran's South Pars gas deal, a US$5bn contract which the company signed in 2017, in light of President Donald Trump's decision to withdraw from the JCPOA and to reinstate the USA sanctions that were in force before the JCPOA's implementation.

The group said it has $10 billion of capital employed in its United States assets, and USA banks are involved in 90 percent of its financing operations, making Total highly vulnerable if targeted by any U.S. actions.

Background: Despite the US withdrawal, Iranian Foreign Minister Javad Zarif met with European Union leaders on May 15 to discuss how to circumvent USA sanctions in an effort to salvage the nuclear deal.

But Total's announcement and similar ones by German insurance giant Allianz and Danish tanker giant Maersk earlier this week illustrate the major obstacles they face trying to overcome renewed US sanctions on Iran. The 20-year development project, of which Total is for now a part of, envisages bringing gas production from the field to 2 billion cu ft of gas daily.

Zanganeh's statement came after the French energy giant said that is preparing to pull out of the gas project in the face of renewed United States sanctions.

According to the agreement, CNPC could take over Total's 50.1 percent stake and become operator of the project if Total withdraws from Iran. Joe Kaeser, the CEO of Germany's Siemens (SIEGn.DE), told CNN his company would not be able to do any new business with Tehran. Total does about 30 percent of its business through the United States banking system.

U.S. sanctions 'possible' on European firms over Iran
If they're going to see that it's not in their interest to stay in the deal; we're going to have to watch what the Iranians do. Mattis, a Pentagon spokeswoman said, gave his confidential advice to the president and did not feel cut out of the debate.

French energy giant Total joined other European companies in signaling on Wednesday they could exit Iran, casting doubt on whether European leaders meeting to try to salvage the Iran nuclear deal can safeguard trade with Tehran.

"The fines are in the multibillions these days so it's just not worth the risk for a small piece of business and maybe pleasing a (European) government".

An official in the French finance ministry said "precise requests" were being lodged with the USA authorities, including for Total, and that the company's decision was not a surprise.

European Commission head Jean-Claude Juncker was due to present options to protect European investment, which could include retaliatory sanctions, allowing the European Investment Bank to invest in Iran, and coordinating euro-denominated credit lines from European governments.

The Phase 11 contract will automatically go to Total's consortium partner China National Petroleum Corporation (CNPC) and local player Petropars if the French player does pull out, Iranian officials have previously said.

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