pull out of Iran due to international sanctions. Total was among the last foreign firms to leave Iran in 2010, but it never closed its office in Tehran. The sanctions also called for a halt to Total's cooperation with Iran in liquefied natural gas (LNG) projects related to Phase 11 of South pars.
CNPC came to Iran after big companies like Royal Dutch Shell and Spain's Repsol withdrew from Iranian oil and gas fields due to the sanctions. That was the time China became a strategic partner for Iran in the oil and gas industry. Development of North Azadegan oil field was awarded to the Chinese company and the first phase of the project recently came online. The Chinese are still in talks with the NIOC for the second phase development of North Azadegan and Yadavaran oil fields.
North Azadegan, one of oil fields shared by Iran and Iraq, holds 6.5 billion barrels of oil in place. Development of this field is envisaged in two phases with a production capacity of 75,000 b/d in each phase.
The financial resources of big Chinese companies and strategies of development of cooperation between the two countries require Iran's petroleum industry to take advantage of this opportunity with a view to maximizing national interests.
Western Media Feedback
The news of signature of agreement was reflected in Iranian and foreign media.
"For Total, the deal would open the way for its return to Iran six years after the French oil major exited the country amid international tensions over Tehran’s efforts to make a nuclear bomb. It would also highlight Total’s hunt for new sources of growth in spite of persistent weakness in the oil market," wrote Financial Times.
It described the agreement as "the first major agreement with Iran for the development of its gas fields since the loosening of international sanctions in January."
The Wall Street Journal wrote: "The agreement with the French oil giant could be a harbinger for the return of more Western companies to Iran’s vast energy industry, and represents a step forward for the Islamic Republic’s goals of ramping up production of oil and gas over the next several years."
It said the agreement "would mark the first Western energy investment there since international sanctions were lifted this year."
“This agreement will be encouraging” for other companies to do business with Iran, particularly those with little activity in the U.S., said Mehdi Varzi, a consultant who advises companies on Middle Eastern investments.
Total was long one of the most active Western oil companies in Iran and its executives have said they were eager to return to a country with the fourth-largest reserves of oil in the world. Total kept an office open in Iran throughout sanctions from 2010 until earlier this year, and was the first European oil company to buy Iranian oil, and ship it to Europe after the restrictions were lifted.
Other Western companies have also made headway in Iran. Last month, BP PLC bought its first oil shipment from Iran while Royal Dutch Shell PLC has signed a preliminary deal to help develop a petrochemical plant there.
The country has said it needs $30 billion of foreign investment to reach its oil-industry goals. Among those aims is ramping up its production of crude oil to six million barrels a day over the next decade, a target that, if reached, would make it the world’s fourth-largest producer behind only Russia, Saudi Arabia and the US, according to the Journal.
For its part, Al-Monitor described the signature of the HOA as a major stride towards materialization of Iran's objectives, saying foreign oil giants were returning to Iran.
Key Step for Technology Transfer
Iran's Minister of Petroleum Bijan Zangeneh was present at the ceremony of signature of the agreement. In his address to the ceremony, he expressed hope that international companies would set aside their doubt about investment in Iran's petroleum industry.
Regarding Total, he said: "Total has been one of leading companies involved in Iran's industry."
He expressed satisfaction with CNPC's involvement in the Phase 11 development of South Pars, saying: "We will never forget Chinese companies that are strategic partners and our cooperation will continue on the long run."
Zangeneh expressed hope for the return of international oil companies to Iran.
"I hope that following the signature of the HOA for Phase 11 development of South Pars gas field, international companies would set aside their doubt for investment in Iran's petroleum industry," he said.
The minister referred to Petropars' 20% share in the Phase 11 development project, saying: "After the signature of this agreement, Petropars will be standing in an important position and it has to benefit from the potentialities of this position for transferring technology in different sectors including management of project and reservoir."
Zangeneh said recovery from jointly owned fields and enhancing the recovery rate of reservoirs were the two main objectives of the Iranian Ministry of Petroleum in its new-style oil contracts. He added that realization of these objectives would amount to protecting and safeguarding national assets.
He once more said that Iran's upstream oil sector needed around $130 billion in investment in order to realize its objectives under the country's 6th Five-Year Economic Development Plan.
"The country's daily oil production should reach 4.5 million barrels by the end of the 6th Plan, part of this enhanced recovery would hinge on applying enhanced recovery methods," the minister said.
Total Eyes Long-Term Cooperation
Stephane Michel, Total's director for Middle-East & North-Africa Total Exploration & Production, referred to the longtime presence of the French company in Iran, saying: "This company has so far cooperated with Iranian companies in a large number of oil projects."
"All of us know that Total reached production in Phases 2 and 3 of South Pars in 2002 and 2003. This French company has cooperated with Iranian companies in Balal and Doroud fields," he said.
"In the past years, Total has not been so active in Iran due to the sanctions, but we have always sought resuming our activities in this country," he said, adding that Total managed to make a return following the implementation of Iran's nuclear agreement with six world powers.
Michel said Total first signed a memorandum for resuming its business in Iran when Iranian President Hassan Rouhani visited Paris in January.
He said the HOA signaled a new beginning for Total's operation in Iran, while expressing hope that it would prepare the ground for long-term cooperation between Total and Iran's energy sector.
Michel said development of Phase 11 of South Pars would give Total a chance to expand its presence in the Middle East region.