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France’s energy major Total SA said on Monday that it had signed a contract to develop phase 11 of the South Pars gas field in Iran—the world’s biggest gas field—marking the first Iranian Petroleum Contract (IPC) with a Western major since most sanctions on Iran were lifted.
Total, leading a consortium of companies and holding a 50.1-percent interest, signed the contract with the National Iranian Oil Company (NIOC) to develop phase 11 of the South Pars (SP11) project, which will have a production capacity of 2 billion cubic feet per day or 400,000 barrels of oil equivalent per day including condensate. The gas produced from the project will supply the Iranian domestic market starting in 2021, Total said.
The 20-year contract is based on the technical, contractual, and commercial terms as per the Heads of Agreement signed in November last year. Total was waiting for an extension of the waiver on U.S. sanctions against Iran before it made the final decision on its investment in the gas project.
Last month, CEO Patrick Pouyanne said that Total would commit US$1 billion to the development of the South Pars field, after the U.S. extended a sanction waiver, but the deal had yet to be inked.
Total, with 50.1 percent, is the operator of the project, while China’s state-owned oil and gas company CNPC has 30 percent, and Petropars—a wholly owned subsidiary of NIOC—owns the remaining 19.9 percent.
According to Total, SP11 will be developed in two phases, with the first phase estimated to cost the equivalent of around US$2 billion. At a later stage, once required by reservoir conditions, a second phase will be launched involving the construction of offshore compression facilities—a first on the South Pars field, Total said.
“This is a major agreement for Total, which officially marks our return to Iran to open a new page in the history of our partnership with the country. We are proud and honored to be the first international company to sign an IPC, which offers an attractive commercial framework, following the 2015 international nuclear accord (JCPOA) and to therefore contribute to the development of relations between Europe and Iran. Total will develop the project in strict compliance with applicable national and international laws”, CEO Patrick Pouyanne said in the company statement.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.