Tue, Jul 04, 2017 - Page 12 News List

French giant Total signs major gas deal with Iran


French energy giant Total yesterday defied US pressure, signing a multibillion-dollar gas deal with Iran, the first by a European firm in more than a decade.

Total will invest an initial US$1 billion in the South Pars offshore gas field as part of a consortium with Chinese and Iranian firms.

The 20-year project, which will eventually see the firms inject US$4.9 billion, is by far the biggest vote of confidence in the Islamic republic since sanctions were lifted under a 2015 nuclear deal with world powers.

“Today, for Total, is a historic day, the day we come back to Iran,” Total chief executive Patrick Pouyanne said at the signing ceremony in Tehran.

The project is the first under a new Iranian petroleum contract, which offers better terms to foreign investors, but has faced intense criticism from hardliners who said it was too generous.

Iranian Minister of Petroleum Bijan Namadar Zanganeh said the deal was a direct result of Iranian President Hassan Rouhani’s resounding re-election victory in May and strong public support for rebuilding ties with the West.

“The people said firmly that our oil policies should continue,” he said. “We shall never forget Total being the forerunner.”

Zanganeh said Iran’s oil industry needs about US$200 billion in investment over the next five years, and European firms have been hungrily eyeing opportunities in a country with the world’s second-largest gas reserves and fourth-largest oil reserves.

However, they have been cautious about investing due to continuing US sanctions.

Total has appointed a compliance officer with the sole task of ensuring it does not fall foul of US measures against Iran. In particular, it must prevent cash flowing to Iran’s elite Revolutionary Guards — a tall order given their extensive and shadowy presence across the Iranian economy.

The White House is in the midst of a 90-day review on whether to abandon the nuclear deal entirely, which US President Donald Trump threatened to do during his election campaign.

The uncertainty has been enough to deter global firms such as BP from dipping their toes in Iranian waters, while Shell and Russia’s Gazprom have signed only preliminary deals to date.

Even without the threat of sanctions, investing in the Iranian economy is not for the faint-hearted.

Foreign firms in Iran still face “pervasive corruption ... high levels of red tape; potential for currency instability [and] reluctance to allow foreign involvement within the domestic economy,” consultancy firm BMI Research wrote in a briefing note yesterday.

For all that, Iran’s large population of middle-class consumers presents an irresistable opportunity for many businesses in Europe and beyond.

Any attempt to scupper the nuclear deal will likely face major push-back from its other signatories.

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