CNPC Takes Over Total’s Share in Iran Gas Field (Update)

Update: Total statement, given Aug.13, in final paragraph.  Correction: paragraph 2 has been corrected to read PetroPars (an earlier version had said Malaysia's Petronas)

CNPC has replaced French major Total in Iran’s South Pars phase 11 project, an Iranian official announced Aug.11.

The Chinese company will take Total’s holding of 50.1%.  CNPC already held a 30% share in the project based on agreement, signed in 2017 and now holds a 80.1% stake; with the remaining shares belonging to PetroPars, a subsidiary of Iranian state producer NIOC.

CNPC is now the operator of project, Mohammad Mortazavi, director of investments at national Iranian oil company, NIOC, told state-run news agency IRNA.

Following the US withdrawal from the Iran nuclear deal, Total said on May 16 it would pull out of South Pars phase 11 project in the absence of a waiver from the US. Iran too have given Total until the end of July to take a definitive decision with regard to South Pars phase 11.

“Total has always been clear that it cannot afford to be exposed to any secondary sanction, which might include the loss of financing in dollars by US banks for its worldwide operations (US banks are involved in more than 90% of Total’s financing operations), the loss of its US shareholders (US shareholders represent more than 30% of Total’s shareholding) or the inability to continue its US operations (US assets represent more than $10bn of capital employed),” its statement at that time read.

To date, Total has spent €40mn on studies and preparing tenders for subcontractors. That amount will be returned to Total gradually only after completion of project, and without any profit.

Why Total is important for SP phase 11?

South Pars phase 11 project was divided into two phases, of which the first has nameplate capacity of 56mn m3/d and cost $2bn. Iran has the technical capabilities to undertake the initial phase, relying on domestic technology; it has already developed more than ten phases of South Pars on its own. However, the second phase requires a 20,000-metric ton platform with two or three compressors by 2022, the year before the expected pressure drop; neither Iran nor CNPC are believed to have previous experience in undertaking. Expected costs are in excess of $2.5bn.

Update August 13

For its part, Total said August 13: "The contractual process is still ongoing and for our part, we have not been informed of an official CNPC position but, as we have always indicated, CNPC, a Chinese state-owned company, has the right to take over our participation if CNPC decides it. "