Monday, 23 July, 2018

Total halts Iran's South Pars gas project over U.S. sanctions risk

Total may pull out of Iran South Pars project Total halts Iran's South Pars gas project over U.S. sanctions risk
Nellie Chapman | 17 May, 2018, 00:36

The announcement shows how European companies are starting to take matters into their own hands as their leaders struggle to save an worldwide nuclear deal with Iran after the United States withdrew and said it would reinstate sanctions on Tehran.

Total said it would not be making any further commitments towards the Iranian South Pars project for now, and added it was engaged with French and United States authorities over the possibility of a waiver to the project.

As a effect of the USA decision to withdraw from the Iran nuclear deal, the company said in a statement that it "will not be in a position to continue" the project, known as the South Pars 11 (SP11).

Siemens CEO Joe Kaeser told CNN this week that Trump's decision meant his company could not do any new business in Iran.

"Total has always been clear that it can not afford to be exposed to any secondary sanction, which might include the loss of financing in dollars by United States banks for its worldwide operations", it said in a statement.

USA banks are involved in more than 90 percent of Total's financing operations, while US shareholders represent more than 30 percent of its shareholding, according to the company.

Since the July 2015 nuclear accord, Total, together with its project partners, has been carrying on tendering for subcontracts and other preparatory work to develop the eleventh phase of the South Pars development, which would supply the domestic market in Iran.

The French company said it had so far spent less than 40 million euros ($47 million) on the South Pars project, and that pulling out of it would not impact the company's general production growth targets.

Other European companies including Volkswagen and Airbus have forged business ties with Iran since the breakthrough 2015 deal was signed.

France, Germany and Britain are leading a European effort to safeguard Europe's economic interests in Iran.

The French state-backed oil group said that without an exemption from the U.S. it would halt work at the world's largest gas field and wind down all its activities by November 4. "With that in mind it's a logical decision", a European diplomat said of Total's decision.

Italy's Eni, which last June signed a provisional agreement with Tehran to conduct oil and gas feasibility studies, said after Washington's decision to quit the nuclear deal last week that it had no plans for new projects in Iran.