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Total, CNPC sign final South Pars gas deal with Iran

03 Jul 2017 13:13 (+01:00 GMT)
Total, CNPC sign final South Pars gas deal with Iran

Dubai, 3 July (Argus) — A Total-led consortium was today awarded a contract by Iran's state-owned NIOC to develop phase 11 of the offshore South Pars gas field in the Mideast Gulf.

This is Iran's first major contract award since it was freed from all nuclear-related sanction in January 2016.

As Argus reported yesterday Total will take a 50.1pc operating stake in the project, with China's state-owned CNPC and NIOC subsidiary Petropars taking 30pc and 19.9pc stakes respectively.

The consortium will develop the project under the terms of Iran's new upstream investment contract model, the Iran Petroleum Contract (IPC), which NIOC and the oil ministry have been rolling out since late last year in an effort to entice foreign companies back to the country post-sanctions. This is the first project to be developed by a foreign company under these new IPC terms.

As per the contract, Total, CNPC and Petropars will produce 335bn m³ of rich, sour gas and 315bn m³ of light, sweet gas from the project over the 20-year period, according to the Iranian oil ministry, all of which will be directed to the domestic market. Total expects to begin supplying phase 11 gas "starting in 2021."

The consortium will produce 290mn bl of condensate from the project over the life of the contract (around 40,000 b/d), 14mn t of LPG, 12mn tons of ethane and 2mn tons of sulfur, the ministry said.

South Pars phase 11 will be developed in two parts. The first will consist of 30 wells and two wellhead platforms connected to the existing onshore treatment facilities by two subsea pipelines. A later investment phase will involve construction of offshore compression facilities.

Total today said the first development phase will cost around $2bn, with the company's share being half of that. Iran's oil ministry has estimated the value of both phases of the development at $4.88bn.

Total chief executive Patrick Pouyanne said the project meets the company's "strategy to expand its presence in the Middle East and grow its gas portfolio by adding low cost, long plateau assets."

NIOC managing director Ali Kardor said the project is expected to generate revenues of "more than $80bn" for Tehran over the life of the contract, assuming oil prices remain at around current levels.

Today's signing comes close to eight months after the two sides signed a provisional deal to develop phase 11 in November 2016.

The contract was signed in Tehran by Iran's oil minister Bijan Namdar Zanganeh, Total's Pouyanne, CNPC International president Lyu Gongxun and Petropars' managing director Ezzatollah Akbari.