First IPC Contract
Total Back to Iran with $5bn South Pars Deal
Iran signed a $5 billion agreement with France's Total SA and a CNPC to develop its massive offshore natural gas field, the first such deal with foreign companies since the landmark 2015 nuclear deal with world powers.
The agreement, which will see the firms develop a portion of the massive South Pars offshore field that Iran shares with Qatar. It was signed in Tehran on July 3.
Total has a 50.1-percent share in the deal. The state-owned China National Petroleum Corp (CNPC) has 30-percent stake and Iran's Petropars has 19.9 percent.
It is the first contract under the newly developed framework – Iran Petroleum Contract (IPC) – for the development of Phase 11 of the giant offshore South Pars gas field.
Implementation of this agreement by the Total-led consortium is expected to bring Iran's energy revenue to over $84 billion.
Development of South Pars gas field, which is jointly owned by Iran and Qatar, has been a top priority for Iran's Ministry of Petroleum under the administration of President Hassan Rouhani.
Ever since IPC was developed by a restructuring committee established by Minister of Petroleum Bijan Zangeneh, development of jointly owned fields was prioritized in international contracts.
In parallel with the definition of a new framework for oil contracts, Iran was in talks with international companies with a view to cooperating in the future.
Zangeneh had promised that a first IPC-based contract would be signed before Rouhani's first administration bows out in August.
After Iran sought investment for the development of Phase 11 of South Pars within the IPC framework, some international companies volunteered to develop this phase. Last year, NIOC and Total started drafting a heads of agreement for the project. An HOA was signed between the two sides in November between Total with a 50.1% stake, CNPC with a 30% share and Petropars with 19.9%.
After the text of the agreement and its 14 appendices were finalized, the $4.879 billion development deal was signed in Tehran in the presence of Minister Zangeneh. NIOC managing director Ali Kardor, Total's CEO Patrick Pouyanné, Petropars CEO Hamid Akbari and Yaohua Lu, who serves as an Outside Director of CNPC, signed the agreement. Total is the leader of Iranian-French-Chinese consortium, and NIOC is the client in the deal.
Int'l Firms Asked to Be More Active
Zangeneh gave an upbeat assessment of the SP11 agreement, expressing hope that a new phase would open in Iran's petroleum industry development.
He said that the SP11 agreement was an immediate outcome of Iran's nuclear deal with six world powers, dubbed the Joint Comprehensive Plan of Action (JCPOA) and the recent re-election of President Hassan Rouhani.
"By participating in the election and re-electing Hassan Rouhani for a second term in office, people firmly decided that the Rouhani administration's oil policy must continue. The Iranian president called on the Ministry of Petroleum to continue the same path," said Zangeneh.
He said that the deal with Total had the approval of Supreme Leader Ayatollah Ali Khamenei.
Zangeneh said a new structure was developed for oil contracts to be attractive enough to foreign firms, while helping transferring in financial resources and technological savvy.
"The approval of this new model of contracts was based on national consensus," said the minister.
Zangeneh said transfer of technology at different levels was one of the most important issues of the day.
"Boosting domestic manufacturing is very important. As of today, we expect Petropars and other Iranian companies to take advantage of the opportunity this contract will create for them," he added.
$5bn Investment in Iran
Zangeneh said the SP11 agreement was valued at $5 billion and described it as foreign investment.
"We never forget Total for its precursor role in this project," he added.
He recalled Total's deceased chief Christophe de Margerie, saying: "He was an intimate friend of Iran and petroleum industry."
Zangeneh also appreciated CNPCI for its cooperation with Iran when the country was under tough sanctions.
"The company was our friend in hard days and will be among our strategic partners post-sanctions," he said.
$200bn Investment Needed
Zangeneh said Iran's Ministry of Petroleum and NIOC had received all necessary permits for the signature of the first IPC deal.
He said that Iran would need to attract $200 billion of investment for its petroleum industry under the 6th Five-Year Economic Development Plan.
"That would include $130 billion for upstream sector and the rest would go to downstream sector," he added.
Zangeneh said 70% of this amount of investment could be provided through foreign financing.
"Given the perspective sketched out for Iran's petroleum industry, which is reaching 6 mb/d of crude oil and gas condensate output under the 6th Development Plan, we need foreign investment," he added.
Zangeneh said development of jointly owned fields was the priority in oil and gas projects, citing the giant Azadegan oil field which Iran shares with Iraq.
U.S. Companies Welcomed
Zangeneh expressed hope that European and Asian companies would become more active in Iran and expedite their efforts to sign contracts with Iran.
He said that cooperation with Chinese and Russian companies would be among Iran's strategic plans, adding: "Of course, Iran does not pose any obstacle to the presence of U.S. companies. This is their own government – U.S. – that has set restrictions to them."
Zangeneh also highlighted the issue of security of energy supply and said: "During its 110 years of presence in global oil markets, Iran has always significantly and effectively contributed to security of energy supply in the world."
‘Historic Day’
"Today, for Total, is a historic day, the day we come back to Iran," Pouyanné said at the signing ceremony. "It's an honor for me to attend this signing ceremony," he