Central Asia, Global View

The French energy company Total returns to Iran

On the 3rd of July of 2017,  The French energy company Total S.A signed a contract with the Iranian Ministry of Petroleum to develop South Pars, the Iranian part of the biggest offshore gas field in the world.

The 4.8 billion USD project is called South Pars 11 and it will be developed jointly with the Chinese state-owned company China National Petroleum Corporation, an integrated international energy company with oil and gas assets and interests in more than 30 countries and the National Iranian Oil Company, one of the world’s largest oil companies. All three companies have previously operated on the Middle East energy market. Total will be the operator with a 50.1% stake, along with CNPC with 30% and National Iranian Oil Co subsidiary Petropars with 19.9 %.

The managing director of NIOC added that, based on the contract, the facility will produce 56.6 million cubic meters of gas per day, with 335 billion cubic meters of gas being harvested during the 20-year contract period and 290 million barrels Gas condensate, 14 million tons of liquid gas, 12 million tons of ethane, 2 million tons of sulfur and 315 billion cubic meters of sweet gas.

The contract marks Total S.A return to Iran, which owns the second largest natural gas reservoir and the fourth petroleum accumulation in the world. The offshore work field of Iran was established in 1990s, the French company Total being one of the most important investors in Iran that worked on phases 2-3 of South Pars, until the enforcement of sanctions on Tehran from 2006. Due to the sanctions imposed by the United States, the operations in the South Pars were undertaken exclusively by Iranian contractors in the past three years. The initiative of Total takes shape a year after United States lifted the sanctions in exchange for the restriction of the nuclear program of Tehran.

The South Pars/North Dome field is a natural gas condensate field located in the Persian Gulf.  It contains 14 000 billion cubic metres of natural gas condensates, representing 8% of world’s total gas stocks. This gas field covers an area of 9,700 square kilometres (3,700 sq mi), of which 3,700 square kilometres (1,400 sq mi) (South Pars) is in Iranian territorial waters and 6,000 square kilometres (2,300 sq mi) (North Dome) is in Qatari territorial waters.

The project will start in a period of 40 months from the signing of the contract. The gas production is intended to meet the internal consumption of Iran, starting in 2021.

The development of the phase 11 of South Pars gas field will be made in compliance with the Group strategy to expand its presence in the Middle East. The project will be carried out in two stages. The first stage consists of raising 30 wells and 2 wellhead platform connected to existing onshore treatment facilities by 2 subsea pipelines. Subsequently, offshore compression facilities will be constructed, which will improve the process of exploitation. The operations will be developed accordingly with the Iranian legislation in force, following the Iranian Petroleum Contract that specifies that the NIOC is a partner of the activities, without sharing the costs and risks of the development of the operations. The loss of production capacity is another reason for Iran to allow foreign companies to be involved in the operations for the exploration and exploitation of the national oil and gas.

Iran initiated a program of gas production in the early 1970s. However, gas production and domestic consumption took a high growth path after the late 1980s with a marked acceleration following the discovery of the South Pars field. Iran’s gross gas production was about 232 bcm in 2014, ranking third in the world after the United States and Russia. About 98 percent of the marketed gas was consumed domestically. Gas demand has grown at a high pace. The country has even struggled with natural gas shortages during the winter months and has looked to imports from Turkmenistan to balance the market during peak periods. Gross gas production is expected to increase at an average rate of 5 percent p.a. from 241 bcm in 2015 to 307 bcm in 2020.

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