The first major Western energy investment since sanctions against Tehran were lifted will cost up to $5 billion, with production expected to start within 40 months, an Oil Ministry source said, Reuters reported.

The US and other world powers lifted sanctions after the country pledged to roll back its nuclear program.

With the 20-year deal, Total is now returning to Iran, where it first began operating in the 1990s. Total CEO Patrick Pouyanné said in a statement on Monday that the investment would be “in strict compliance with applicable national and international laws”.

The US still has restrictions in place that block most American companies from investing in Iran. And some Western companies have been reluctant to jump in since Iran still faces sanctions that prevent firms from transacting with Iran in US dollars.

Total estimates the first phase of the project will cost around $2 billion. It is taking a 50.1 percent stake in the South Pars project. CNPC will own 30 percent while the other 19.9 percent will go to Petropars.

The project will have a production capacity of two billion cubic feet per day, or 400,000 barrels of oil equivalent per day including condensate, according to Total.

Iran’s Oil Ministry predicts the project will eventually produce gas products worth $54 billion based on current prices. The gas will start flowing into the Iranian market in 2021.

Iran has significantly ramped up its energy production since the sanctions were relaxed.

Figures from OPEC show Iran has boosted its daily crude oil production by more than 33 percent since 2015.

Iran sits on nine percent of the world’s proven oil reserves and 18 percent of the planet’s natural gas, according to data from BP’s Statistical Review of World Energy.

Iran and Qatar share the South Pars field.

Iran has signed a flurry of deals with Western companies over the past year since the easing of international sanctions on Tehran after an accord was reached over its nuclear program.

Iran needs foreign investment to repair and upgrade its oil and gas fields. It also seeks the transfer of technology to its oil industry after a decade of sanctions.

Iran has named 34 companies from over a dozen countries as being eligible to bid for oil and gas projects using the new, less restrictive contract model.

The firms include Shell, France’s Total, Italy’s Eni, Malaysia’s Petronas and Russia’s Gazprom and Lukoil, as well as companies from China, Austria, Japan and other countries.

Russia’s Zarubezhneft signed an MoU to conduct feasibility studies on two joint fields in the west of the country.

Norway‘s International Aker Solutions Company signed an MoU to modernize Iran’s oil industry.

In May 2016, Austria’s OMV signed an MoU for projects in the Zagros area in western Iran and the Fars field in the south.

South Korean Daewoo Engineering and Construction (Daewoo E&C) signed an MoU to construct an oil refinery in Bandar Jask, on the southern coast of Iran.

Italy’s Saipem signed MoUs to cooperate on pipeline projects, upgrading of refineries and development of Tous gas field in the northeastern province of Khorasan Razavi.

Norwegian oil and gas company DNO said it was the second Western energy company after Total to sign a deal with Iran under which it agreed to study the development of the Changuleh oilfield in western Iran.

Lukoil, Russia’s second biggest oil producer, hopes to reach a decision on developing two new oilfields in Iran.

Germany’s Siemens AG signed an MoU in May to overhaul equipment and facilities at Iran’s oil operations and refineries.

BASF’s Wintershall oil and gas exploration subsidiary signed an MoU with the National Iranian Oil Company in April 2016.

President Rouhani:
Developing South Pars Phase 11 not only an economic contract, but also a scientific, technological, management cooperation

President Rouhani met with the Chairman and CEO of France’s Total company and described South Pars region as an important centre for developing international cooperation with Iran in the field of energy-technology.

In the meeting that was held on Monday in Tehran, Dr Rouhani told Total’s Patrick Pouyanné: “Due to the good potentials and hard-working young men in Iran, the contract of developing Phase 11 of South Pars is not only an economic one, but also a scientific, technological and management cooperation”.

Total CEO: We seek a long-term cooperation with Iran

“The Islamic Republic of Iran and France have always had good relations and cooperation with each other,” he continued saying.

Referring to France’s position in economy and energy technology, he added: “The signing and execution of this contract will be a significant step in development of economic and technological cooperation between the two countries”.

Stating that the 11th administration has attempted to finalise the Joint Comprehensive Plan of Action (JCPOA) to clear the path for economic cooperation between major companies and Iran, the President said: “Fortunately, this political will from the Iranian side and among P5+1 countries paved the way for this agreements with Total”.

President also referred to his Europe and France visit after the signing of JCPOA, adding: “In Paris, there was a good political will among the authorities of both countries to develop cooperation and important agreements were signed between the two countries to deepen ties and cooperation”.

“It is our policy to cooperate with major companies such as Total,” said Dr Rouhani, adding: “Currently, projects in gas and oil worth roughly $200bn are ready to be invested on and major foreign companies can cooperate in these projects”.

“We must work hard to achieve peace and stability in the region serving economic progress and development of the region, because scientific and developmental cooperation can help us combat ignorance and poverty as the bedrocks of terrorism expansion,” he continued.

The President also expressed hope that with the new agreements and cooperation in the field of gas, oil and petrochemicals, Iran and France take considerable steps in developing ties.

During the meeting, the Chairman and CEO of France’s Total company Patrick Pouyanné also expressed happiness over meeting the President of the Islamic Republic of Iran and described the contract as a very important one, saying: “Today, we are very happy that we could finalise and execute the contract with the help of the authorities of the two countries”.

Stating that the JCPOA agreement has paved the way for further development of relations between European countries and Iran, he said: “We are optimistic about our cooperation with Iranian companies”.

“We seek a long-term cooperation with Iran,” continued Pouyanné.

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Deputy Minister of Roads and Urban Development for International Affairs Asghar Fakhrieh Kashan was quoted by Press TV as saying that nine financial institutions from Norway, Denmark, Ireland, Britain, China and Japan had already approached Iran to fund the purchases.

He did not disclose the names of the interested financers.

Nevertheless, he underlined that arrangements to hold a tender to choose the financier for the purchases were underway, adding that tender documents would be sent out to potential bidders within a month.

Last week, he was quoted by THE media as saying that Britain’s key export credit agency — UK Export Finance (UKEF) — had informed Iran’s Ministry of Roads and Urban Development that it was ready to provide funding for all of Iran’s purchases from Boeing and Airbus.

He stressed that Iran wanted to have an open hand in choosing the best financiers and that a tender to this effect would be held soon.

“Iran Air is preparing the tender documents so that they would be sent to all credible financiers worldwide,” Fakhrieh Kashan told IRNA.

“We are in conditions that permit us to choose our desired financiers in a competitive atmosphere that a tender creates.”

Also, Iran’s media last October quoted an unidentified government official as saying that Boeing had sealed a deal with an American bank to provide financing for Iran’s purchase of airliners in cooperation with a Japanese bank.

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Addressing a press conference on Tuesday on the sidelines of Iran Oil Show (2017), Managing Director of Khazar Exploration and Production Company (KEPCO) Mohsen Delaviz said his company was in talks with a number of international companies for exploration and development of Caspian Sea oilfields.

The official commemorated the anniversary of oil exploration in Caspian Sea recalling that “in May 2012, we reached oil at the depth of 2,500 meters in Sardar Jangal field.”

Negotiations are underway with credible Exploration and Production (E&P) companies for drilling wells in deep water, said Delaviz estimating that volume of investment in the sector will grow by 130 per cent.

“Caspian Sea, as the world’s largest lake, contains huge and untouched oil and gas reserves,” he underscored.

KEPCO head also stated that “National Iranian Oil Company has assigned the project for feasibility study on Mansouri and Ab-Teymour fields to MAPNA Group, which is a domestic company.”

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Jonathan Andrews, Director & Head of Eastern Underwriting in Steamship Mutual, said a considerable number of Iranian vessels have taken out insurance form our company and “we are pleased to observe return of Iranian directors to the board of one of the largest and most diverse P&I Clubs in the world.”

Prior to imposition of sanctions against Iran in 2009, Steamship Mutual, as a leading provider of Protection & Indemnity (P&I) insurance, was the main and most favorable insurer of Iran’s shipping fleet.

IRISL has purchased insurance from Steamship Mutual for container ships and multi-purpose vessels though vessels active in the field of international trade will receive top priority.

Earlier in August, during a visit to Tehran of a Norwegian delegation, a Memorandum of Understanding was inked between Iranian Shipping Lines (IRISL) and the Skuld Marine SKULD P&I Club for shipping insurance cooperation.

By virtue of this MoU, different cooperation grounds between the Islamic Republic of Iran Shipping Lines (IRISL) and the Norwegian SKULD P&I Club including providing different types of maritime insurances, considering and pursuing complaints regarding maritime insurances coverage, training personnel and promoting the knowledge and competency of the Iranian experts were discussed and the respective mutually agreed issues were signed by both parties.

IRISL was the first Iranian shipping line to be affected by Western and European sanctions. Presently, IRISL and the National Iranian Tanker Company (NITC) have resume cooperation with Steamship Mutual international club in a bid to revive previous relations.

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Iran is now in more active talks with insurers to provide cover in a market valued at $9 billion overall last year and potentially double that in the next decade. The country trying to reap the benefits of last year’s nuclear deal with world powers, Reuters wrote on Friday.

Western companies need insurance in order to resume business with Iran. Shipping and trade credit insurance, which remove the risk of nonpayment for goods, are the first types of insurance being offered.

“There is generally a lower degree of fear and apprehension and that is because you have not had the big fines on the insurers that the banks have faced,” said leading London sanctions lawyer Nigel Kushner.

“We are going to see greater and quicker movement there than on the banking side, at least in London and the UK,” said Kushner, who is also a director of the British Iranian Chamber of Commerce.

As Iran has aimed to ramp up oil exports, securing marine insurance has been crucial. Top tier Western ship insurers have started offering services in recent months.

Insurances for Iranian tankers

Iran’s Deputy Oil Minister Amir Hossein Zamaninia has said European insurers now have no problems insuring Iranian oil tankers.

Protection and Indemnity (P&I) clubs – marine insurers owned by shipping firms – have started to provide cover for Iran’s shipping fleet, including its oil tankers.

Jonathan Andrews, director and head of eastern underwriting with Britain’s Steamship Mutual, said it was insuring ships for Iranian tanker operator NITC and also for Iranian cargo ship operator IRISL.

“We have a long history of insuring Iranian ship owners,” Andrews told Reuters. “We are happy to be insuring our former members again.”

Norwegian ship insurer Skuld said it was in discussions with IRISL, while it was already insuring NITC ships.

Others such as the UK’s Standard Club said they were covering vessels trading to and from Iran, but did not say whether this related to Iranian shipping firms.

Ship insurers say there are still constraints on payments, given a freeze on using the US financial system.

“Problems remain however in relation to the channeling of payments through the banking systems, both in relation to collection of premium and settlement of claims,” said Andrew Bardot, executive officer with the International Group, which represents ship insurers.

This was due to the reluctance of many banks and financial institutions to process such payments, and was now the main concern for insurers and reinsurers, he said.

“Solutions are being found, but it is a difficult process and likely to remain so for the foreseeable future.”

More transactions

US banks are forbidden to do business with Iran under domestic sanctions still in force. European banks also face problems, since transactions with Iran in dollars cannot be processed through the US financial system.

Banks remain nervous after some heavy US penalties, including a $9 billion fine on France’s BNP Paribas (BNPP.PA) in 2014, largely for violating US financial sanctions.

Despite this, European export credit agencies are guaranteeing trade finance for Western companies doing business with Iran.

Germany’s state-run export credit group Hermes has concluded trade finance deals covering goods worth several million euros.

“About a dozen transactions have been approved so far,” a Hermes spokesman said.

“The demand is there from the exporters’ side but they need a lot of information. There is a continuous and rising flow of applications (for export credit guarantees).”

Italian export credit agency SACE has also undertaken its first small transactions with Iran.

“The lingering risks should not be underestimated, however, as they might create problems … legal, documentary, operational, for companies interested in building or restoring commercial or financial relationships with local counterparties,” a SACE spokesman said.

France’s Coface has signed an agreement with Iran to guarantee trade finance on behalf of the French government.

France’s Coface has signed an agreement with Iran to guarantee trade finance on behalf of the French government. Nevertheless, major transactions were yet to be concluded due to the banking issues.

Aviation and energy are two sectors in focus, industry executives say, along with political risk cover, even if there have been few deals so far.

Christian Bieri, EMEA reinsurance head at insurance group MS Amlin, said Iran was “very much under discussion”.

“It’s very high up the agenda,” Bieri said. “It’s going to be something for 2017.”

Other large insurers and reinsurers such as Hannover Re (HNRGn.DE) are looking closely at Iran, but say concerns about payments still prevent them from doing business there.

Swiss Re (SRENH.S) chief executive Christian Mumenthaler told Reuters: “We have big business in the US and so our chief legal officer is basically regulating every micro-step we do in that direction.”

Lloyd’s of London had historically been active in Iran and chairman John Nelson said it was a “market we would like to get back into”.

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Foreign Minister of Norway, Børge Brende is in a tour of Iran and met with his Iranian counterpart Javad Zarif earlier on Wednesday. They discussed bilateral trade, where both sides highlighted improved relations in banking and fiscal cooperation along with cooperation in other sectors.

The meeting produced 3 MoUs signed by Zarif and Brende and respective export finance authorities of both sides. According to one MoU, Norway will open a credit line worth €1bn for Iran to finance infrastructural projects planned in Iran.

Mr. Brende had also visited President Rouhani, Parliament Speaker Ali Larijani, Ali Shamkhani, Secretary of SNSC, Leader’s Adviser Ali Akbar Velayati, and Minister of Oil Bijan Namdar Zanganeh in separate meetings.

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