Total Will Quit S Pars, if Sanctions not Waived
Total will pull out of the Iran South Pars phase 11 gas project (SP11) in the absence of a waiver from the US, it said May 16. The French major agreed to develop the project in July 2017 alongside partner PetroChina.
The French firm had recently explained that it will not be in a position to continue the SP11 project and will have to unwind all related operations before November 4 2018 unless it is granted a specific project waiver by the US, with the support of French and European authorities. Such a project waiver should include protection of the company from any secondary sanction as per US legislation, it said.
Its statement follows the decision by US president, Donald Trump, on May 8 to withdraw the US from the Iran nuclear agreement and to reinstate or redouble US sanctions.
“Total has always been clear that it cannot afford to be exposed to any secondary sanction, which might include the loss of financing in dollars by US banks for its worldwide operations (US banks are involved in more than 90% of Total’s financing operations), the loss of its US shareholders (US shareholders represent more than 30% of Total’s shareholding) or the inability to continue its US operations (US assets represent more than $10bn of capital employed),” its statement read.
In these circumstances, Total will not take any further commitment related to the SP11 project and, in accordance with its contractual commitments with the Iranian authorities, is engaging with the French and US authorities to examine the possibility of a project waiver. The French oil major said its actual SP11 spending to date is less than €40mn ($40mn).
Given other recent growth opportunities, Total said that a withdrawal from SP11 would not impact its production growth target of 5% compound growth per year between 2016 and 2022.
The statement will disappoint Tehran which, on May 8 prior to Trump's decision, talked up the chances of SP11 being continued regardless, and by CNPC-owned PetroChina alone if Total were to back out.
Update May 17: Iranian news agency Shana reported that the small UK firm Pergas signed a heads of agreement to develop the Karanj oilfield with NIOC subsidiary NISOC May 16 in the presence of the British ambassador who spoke in support of Iran nuclear deal; it is the first such upstream agreement by a western investor in Iran signed since Trump's decision.