Total confirms exit from $4.8bn gas project in Iran before US deadline

French oil major said its co-investor CNPC had the right to replace it as lead on the asset

Total had the majority stake alongside the Chinese state oil company as well as local Petropars to produce gas and condensate from phase 11 of South Pars. REUTERS/Charles Platiau

French oil major Total has confirmed its withdrawal from a $4.8 billion Iranian gas project, leaving the door open for co-investor China National Petroleum Company to take the lead on the asset.

"Total has notified the Iranian authorities of its withdrawal from the contract following the 60-day period specified in the contract to obtain a potential waiver from the US authorities," a Total spokeswoman told The National. "Despite the backing of the French and European authorities such waiver could not be obtained."

The French energy company had the majority stake alongside the Chinese state oil company as well as local operator Petropars to produce gas and condensate from phase 11 of South Pars, the world’s largest gas field that is shared with Qatar. The agreement signed in 2016 following the lifting of nuclear-related sanctions over Tehran was touted as a big win for the beleaguered Iranian energy sector.

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Total, along with the parties to the deal, moved to get work started, issuing tenders for engineering, procurement and construction on gas platforms. The oil major’s withdrawal following an ultimatum given by the White House, which exited the Iran deal in May and enforced the first wave of sanctions this month, leaves CNPC and Petropars to continue work on the asset.

“As for the future of Total’s stake in the contract, we have not been informed of an official CNPC position, but as we have always said, CNPC, a Chinese state-owned company, has the right to take over our participation should it decide to do so,” added the spokeswoman.

CNPC could not be reached for comment. 

The agreement to develop phase 11 of South Pars, the world’s largest gasfield, which Iran shares with Qatar, was a major win for the country’s crippled energy infrastructure. Iran sits atop the world’s second-biggest reserves for gas after Russia, but is still reliant on imports from neighbouring Azerbaijan and Turkmenistan to help cope with harsh winters since its domestic infrastructure cannot satisfy rising local demand.

Total joins Asian refiners who have scrambled to meet deadlines set by the administration of President Donald Trump to lower their exposure to Iran by either exiting earlier deals or downsizing crude off-take agreements.