State-owned China National Petroleum Corporation (CNPC) is expected to lead the $5bn Iran gas field development project, after US sanctions have forced French energy giant Total to halt operations.
CNPC joined a consortium with Total and Iranian oil and gas company Petropars to develop Phase 11 of the South Pars gas field in 2016. Total originally planned to take a 50.1% stake in the project, with CNPC taking a 30% interest. China’s state-owned oil and gas giant will now increase its stake to become the lead operating partner, according to National Iranian Oil Co.’s chief of business Mohammad Mostafavi.
Total established the agreement with Iran in July last year, and has since spent €40m ($45.7m) on the project before the US announced sanctions on Iran in May.
The first round of sanctions was imposed last week, with more expected in November, further complicating business efforts by multinationals that entered the Iranian market when the 2015 Iran nuclear deal came into effect.
Iran agreed to take steps to limit its nuclear programme and submit to verification by the International Atomic Energy Agency in exchange for removing economic sanctions on the country. Since US President Donald Trump’s reversal of the deal, a number of European companies, including Total, have exited the market.
Total announced last July that it planned to invest $1bn in Phase 11 of the Iran gas field development project, which has a potential production capacity of two billion cubic feet of gas, or 400,000 barrels of oil equivalent per day, including condensate.
Total CEO Patrick Pouyanne said: “Within the US legal framework, we can’t work in Iran. It’s impossible for a company like ours, and for most or even all global companies, even maybe the Chinese. Our partners haven’t told us yet that they will take over our stake in our project.”
While the terms of the current contract have not yet changed, CNPC declined to comment on whether it will take over Total’s stake.
CNPC has been active in Iran’s oil and gas development since 2004, and was awarded a three-year contract to provide offshore well-logging and other services in the South Pars field.