French energy company Total confirmed the signing of a preliminary arrangement to work alongside a Chinese company in producing offshore Iranian gas.
Total signed a head of agreement deal with the National Iranian Oil Co. to help develop phase 11 of the South Pars natural gas complex in the Persian Gulf, the largest of its kind in the world. For Total, Chairman and CEO Patrick Pouyanne said it's a return to business that started more than 10 years ago.
"Total is pleased that the discussions with NIOC resulted in an attractive commercial framework," he said in a statement. "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."
There was no statement from CNPC on the agreement. Total will serve as the operator at the project with a 50.1 percent stake. CNPC takes on a 30 percent share.
CNPC has long been a potential partner for South Pars development projects. Outside of the offshore field, it signed an agreement in 2009 with the NIOC to develop part of the Azadegan oil field, which straddles the border with Iraq.
Iran raised concerns in 2013, however, about CNCP agreement at the oil field and later canceled the contract, citing poor performance and a failure to meet its obligations.
The development comes as Iran tries to bring new foreign investors to an energy sector slowly reopening after years of isolation because of Western sanctions. Sanctions pressures have eased since Iran agreed to a multilateral nuclear agreement last year.
Under the terms of the agreement for South Pars, project partners will work toward finalizing a 20-year formal contract that meets the terms of post-sanctions guidelines. Total said it would start the bidding process for contracts to help develop the field once a final agreement is signed.
By Daniel J Graeber