Iran faces Total withdrawal, signs new oil contract with Pergas

Marcus Newton
May 17, 2018

The comments from Total - the first Western oil company to sign binding agreements to develop Iran's oil and gas fields following the end of a previous round of sanctions in 2015 - illustrate the challenge posed by renewed USA restrictions.

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. Total entered into a three-way agreement to develop the South Pars area in Iran for oil and gas exploration.

By contrast, Total said it had spent less than 40 million euros ($47 million) on the Iranian project, which it runs with its partner Petrochina and which is dedicated to the supply of domestic gas inside Iran.

"It would be suicide to do any new business or funding for Iran or Iran-related companies without explicit guarantees from the US government".

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.

The US decision to withdraw from the nuclear deal between Iran and an alliance of western powers was taken earlier this month, despite opposition from France, Germany and the United Kingdom, and threatens a huge swathe of worldwide business deals.

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Total said it was working with French authorities towards trying to secure a waiver for the South Pars project.

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. Total does about 30 percent of its business through the United States banking system.

Joe Kaeser, the CEO of Germany's Siemens, told CNN his company would not be able to do any new business with Tehran. "With that in mind it's a logical decision", a European diplomat said of Total's decision.

Total said it would not be making any further commitments towards the Iranian South Pars project for now, and added it was engaged with French and USA authorities over the possibility of a waiver to the project. In an ironic twist, Trump's decision to threaten European companies that continue to invest in Iran may open the door to Chinese rivals.

For the French firm to remain, a challenge waiver must shield the corporate from "any secondary sanction as per U.S. laws", it mentioned. Chinese state-owned oil and gas company CNPC holds a 30 per cent share and National Iranian Oil Co subsidiary Petropars 19.9 per cent. Industry sources told Reuters this week that CNPC was ready to take over Total's stake project if it pulled out.

Other reports by MaliBehiribAe

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