France’s Total is the first foreign firm to sign a heads of agreement deal to develop Phase 11 of the Iranian South Pars gasfield since Western sanctions against the country were loosened. The deal, signed in November 2016, is an important step in the advancement of one of the world’s largest gas reserves. So where will the project go from here and what challenges does it still face?
In the middle of the Persian Gulf, Iran shares a claim to one of the largest gas fields in the world – South Pars. Its reserves account for roughly 7.5% of the world’s gas reserves and almost 40% of Iran’s total natural gas wealth.
This resource covers an area of 9700km2, of which 3700 km2 belongs to Iran and the rest to Qatar, where it is known as the North Field.
The Iranian portion is estimated to contain some 14 trillion cubic metres of gas reserves and some 18 billion barrels of gas condensates, according to Pars Oil and Gas Company (POGC), a subsidiary of the National Iranian Oil Company (NIOC).
Since the mid-2000s development of the field has stagnated due to a lack of foreign investment and export opportunities because of United Nations (UN) and Western sanctions against Iran. A partial lifting of these sanctions in 2015 has enabled POGC, which was established in 1998, and the government to move forward with the 24th development phase set out for the field.
The Total deal
In November 2016, French multinational Total became the first foreign company to sign a heads of agreement deal with NIOC worth $2bn. Previously, only memoranda of understanding with foreign firms had been signed.
The Total deal includes a two-phase project, working with Chinese CNPC and Iranian Petropars, for 30 wells and two wellhead platforms connected by two subsea pipelines to existing treatment facilities onshore. The second phase will include construction of offshore compression facilities. Total will serve as operator of the project.
Project partners are now working to finalise the 20-year deal under terms established by the recently approved Iranian Petroleum Contract.
Jean-François Seznec, scholar at The Middle East Institute, says the Total deal is ‘significant’ for the development of this capital-intensive project as the company already has extensive experience in South Pars. The corporation developed phases 2 and 3 of the field before the UN imposed sanctions in 2006 that forced it to exit Iran.
“Of course, the issue for Total, as for every international operating company, is to actually finalize a deal with the Iranians, which is always harrowing,” he adds.