Total Pledges $1 Billion Investment in Iran Gas Field--Update
June 20 2017 - 9:56AM
Dow Jones News
By Sarah Kent
France's Total SA on Tuesday said it is planning to push forward
with a $1 billion investment in a giant Iranian gas field, the
first commitment by a Western company to put real money into the
Islamic Republic's re-emerging energy industry.
The Paris-based oil giant has been at the forefront of Western
energy companies looking to return to Iran after sanctions on its
energy industry were lifted in January 2016. Total reached a
preliminary agreement late last year with Iran to invest $4.8
billion to develop parts of a giant gas field in the Persian Gulf
alongside China National Petroleum Corp., but the deal is still
being finalized.
In May, Iran's oil minister Bijan Zanganeh told The Wall Street
Journal he was "very optimistic" about reaching an agreement with
Total "very soon."
Total's imminent investment decision was first reported by
Reuters. A spokeswoman for Mr. Zanganeh didn't respond to a request
for comment. Total declined to comment further on its investment
plans.
The deal would mark a step forward for Iran's oil industry,
which the country's oil ministry says needs tens of billions of
dollars in foreign investment. But many companies have been
cautious to return with uncertainty over U.S. sanctions still
looming, weak oil prices and uncertain financial terms.
"You can see it as a sign that things are slowly beginning to
progress in Iran's upstream, but you can also see it as a sign of
just how cautious western companies are being," said Richard
Mallinson, an analyst at consultancy Energy Aspects.
U.S. companies like Exxon Mobil Corp. are essentially prohibited
from working in Iran by remaining U.S. sanctions over terrorism,
human rights and weapons proliferation concerns. European companies
are allowed to work with Iran, but energy firms have moved
cautiously.
Royal Dutch Shell PLC agreed to explore future projects with
Iran's state oil company last December but hasn't moved forward
yet. "Shell is exploring potential business opportunities in Iran
in line with our long-term strategy," a company spokesman said.
Italian oil company Eni SpA said Tuesday it has signed an
agreement to study two Iranian oil and gas fields as part of a
wider deal to recoup $280 million still owed to the company for
previous investments. Eni said the agreement didn't include a
commitment to invest.
Iran's oil sector has endured a turbulent history marked by
waves of nationalization and successive sanctions. The country
holds the world's fourth-largest crude oil reserves and
second-largest natural gas reserves, but production growth has been
stymied by the political turmoil and uncertainty.
Remaining U.S. sanctions forbid American banks from dealing
directly with Iran and prevent all business with the Iranian
Revolutionary Guard Corps., a hardline security service that is
deeply involved in the country's oil and gas sector. Companies are
leary of the financial terms they may have to accept to invest in
the country. Depressed oil prices remain a general obstacle to big
ticket investments.
Pushing forward with its Iranian investment would give Total a
foothold in one of the world's largest gas basins, known as South
Pars. The field, which Iran shares with Qatar, contains almost 40%
of Iran's total proved natural gas reserves, according to the
Energy Information Administration.
Total was long one of the most active Western oil companies in
Iran and kept an office open in the country throughout the
sanctions period. It was the first European oil company to buy
Iranian oil and ship it to the continent after restrictions were
lifted in early 2016. It has previously touted the benefits of
being a first mover in returning to the country.
--Benoit Faucon contributed to this article.
Write to Sarah Kent at sarah.kent@wsj.com
(END) Dow Jones Newswires
June 20, 2017 10:41 ET (14:41 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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