By John Lee.
French oil giant Total has signed a Heads of Agreement (HoA) with the National Iranian Oil Company (NIOC) for the development of phase 11 of South Pars, the world’s largest gas field.
The company becomes the first western energy firm to sign a major deal with Tehran since the lifting of international sanctions.
According to the Financial Times, the three companies are expected to invest $4.8 billion in Phase 11.
The South Pars 11 project (SP11) will have a production capacity of 1.8 billion cubic feet per day, or 370 000 barrels of oil equivalent per day. The produced gas will be fed into Iran’s gas network.
Total will operate the SP11 project with a 50.1% interest alongside Petropars (19.9%), a 100% subsidiary of NIOC, and the Chinese state-owned oil and gas company CNPC (30%).
Patrick Pouyanné, Chairman & CEO of Total, said:
“Following Total’s successful development of phases 2 and 3 of South Pars in the 2000s, the Group is back to Iran to develop and produce another phase of this giant gas field. Total is delighted to have been selected by NIOC – it is a recognition of both our technical expertise and the partnership the Group has built with Iran over the years. Total is pleased that the discussions with NIOC resulted in an attractive commercial framework.
“Total will develop the project in strict compliance with national and international laws and looks forward to working alongside the Chinese state-owned company CNPC in this additional international partnership. This project fits with the Group’s strategy of expanding its presence in the Middle East, where the origins of the Group lie, and growing its gas portfolio by adding low unit cost, long plateau gas assets.”
Under the terms of the HoA, NIOC and the project partners will conduct exclusive negotiations to finalize a 20-year contract in accordance with the technical and economic terms established in the HoA, within the framework of Iranian Petroleum Contract (IPC) recently approved by the Iranian Parliament.
In parallel, Total will launch engineering studies and a call for tender process so that construction contracts can be awarded immediately upon signature of the final agreement.
The SP11 project will be developed in two phases. The first phase, with an estimated total cost of around 2 billion dollars equivalent, will consist of 30 wells and 2 well head platforms connected to existing onshore treatment facilities by 2 subsea pipelines. At a later stage, a second investment phase, involving the construction of offshore compression facilities, will be launched once required by the reservoir conditions.
(Sources: Total, Shana, NIOC, Financial Times, Reuters)