Speaking after a ceremony to sign a deal between National Iranian Oil Company (NIOC) and an consortium comprising Total, China’s CNPC International and Petropars in Tehran on Monday, Mr. Zangeneh said $130 billion dollars will be invested in upstream projects and the rest will be allotted to developing downstream projects in the industry.
He said over 70% of the amount can be supplied by tapping foreign resources, adding, “We need foreign investments in order to reach the envisaged 6 million barrels per day of crude oil and condensate output under the 6th development plan of the country.”
The official also said that arrangements for holding a tender for developing Azadegan Oilfield.

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The deal is the Islamic Republic’s first with a European oil company in more than a decade, marking a major milestone for a country whose standing as an international trade partner has hung in the balance ever since it was slapped with sanctions in 2006 amid concerns that it was developing nuclear weapons.

Total has taken a 50.1 percent interest in the South Pars project, and alongside state-owned China National Petroleum Corporation, which holds 30 percent, and Iran’s Petropars (19.9 percent), will begin producing gas for the Iranian market from 2021.

Though the deal has been a slow burn, coming some 18 months after EU sanctions against the Middle Eastern nation were lifted, Iran will be hoping that it marks a new era of investor confidence and a particular boon for its dwindling oil production.

“Total’s decision to sign the South Pars 11 contract is a cautiously positive sign for foreign investment in Iran’s upstream,” Richard Mallinson, geopolitical analyst at Energy Aspects, told CNBC via email on Monday.

Who else is ready to invest in Iran?

Already, India, one of Iran’s most steadfast trading partners, on Monday announced that a consortium of domestic businesses would offer up to $11 billion to develop another of Iran’s natural gas fields, Farzad-B field, and create the infrastructure to export the fuel, Bloomberg reported, quoting Narendra Kumar Verma, managing director of the overseas investment unit of India’s largest explorer, Oil and Natural Gas Corp. (ONGC). / Farzad B gas field, Persian Gulf

Iran is the second-largest supplier of crude oil to India, and, as a result, India is one of the largest foreign investors in Iran’s oil and gas industry. However, fraught diplomatic relations between Iran and other states have made it a difficult relationship to uphold.

Under US sanctions, which were reinforced last month, India has been unable to trade with Iran using the dollar — the world’s premier reserve currency — and had to defer payments or revert to payments in rupees and, more recently, euros.

Iran has the world’s largest natural gas reserves and the fourth-largest oil reserves, according to the US Energy Information Administration. This translates to 10 percent of the world’s crude oil reserves and 13 percent of OPEC’s.

Why is Total doing the deal now?

Total was previously one of the biggest investors in Iran before sanctions were imposed. Though the deal was laid out last year, the group has been awaiting clarity on the Trump administration’s stance on sanctions.

During campaigning, President Donald Trump pledged to ‘dismantle’ the 2015 nuclear agreement, which aimed to reduce sanctions, though has not yet followed up on it.

Total has so far only committed to an initial $1 billion investment, citing continued risks. The stock was up 1.78 percent when the deal was signed Monday.

Though the investment will help revive Iran’s antiquated energy sector, which has borne the brunt of years of under-investment into the country, it will be purely domestically focused.

It is likely to have less of an impact on the wider international markets, which have been struggling to balance output since a supply glut saw prices plummet in early 2015.

Brent prices were lower by 0.06 percent in Monday afternoon at $48.75 per barrel while US crude was up 0.09 percent at $46.08 per barrel.

Lack of new deals holding back growth

Indeed, while companies including Royal Dutch Shell and Italy’s Eni have signed provisional agreements with Iran, according to the FT, the path ahead to recovering Iran’s energy sector looks far from smooth.

“Other developments are not so positive,” said Mallinson, citing Azadegan, another Iranian oilfield project which has suffered continued delays amid uncertainties over Iran’s trading future.

“The tender for the Azadegan oilfield was supposed to be imminent but was then pushed back by three or four months to give foreign companies more time for analysis. This suggests that the major firms that Tehran really wants to attract are largely not ready to commit to Iran deals.

“Currently Iran’s oil production has flat-lined and each new delay to the return of foreign investors pushes back the timeline for further growth in output,” Mallinson added.

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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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Total will lead a consortium, which will also include China National Petroleum Corporation (CNPC) and Iran’s Petropars, to develop Phase 11 of the South Pars field under a 20-year contract worth $4.8 billion (€4.3 billion), AFP reported.

The project will eventually supply 50.9 million cubic meters of gas per day into Iran’s national grid, and marks a breakthrough in the Oil Ministry’s efforts to attract Western investment and know-how to improve its outdated energy infrastructure.

The companies involved signed a memorandum of understanding in Tehran on Tuesday, and the final agreement will be inked early next year, said head of Total’s Middle East exploration and production, Stephane Michel.

It is the first deal of its kind since most international sanctions on Iran were lifted in January under a nuclear deal with world powers.

Iran’s Deputy Oil Minister Amir Hossein Zamani-Nia said another major deal with a European company would be signed “in two to three weeks”.

Tuesday’s signing represents Total’s return to Iran, which has the largest gas reserves and fourth-largest oil reserves in the world.

Total helped develop phases two and three of South Pars, but effectively left Iran four years ago when France joined European Union partners in imposing sanctions, including an oil embargo. “We’re the first Western major to return to Iran. We’re very happy,” Total Chairman Patrick Pouyanne told AFP.

“It’s important because it’s always when we innovate and when we are first that we score points,” he added.

Iran’s Oil Minister Bijan Namdar Zanganeh thanked Total and CNPC for working with Iran despite ‘difficult conditions’.

“I hope the international companies that are still hesitating to come to Iran will be encouraged to take the leap,” he said.

The South Pars field in the heart of the Persian Gulf is shared by Iran and Qatar, and contains some 14 trillion cubic meters of gas or eight percent of the world’s known reserves.

“It’s a field we know well because we produce on the Qatar side,” Pouyanne said.

He said there would be none of the banking problems that have bedeviled recent trade deals with Iran, because Total would use its own cash.

Despite the nuclear deal, the United States has maintained a raft of other sanctions, leaving global banks fearful they could still face massive fines for doing business with the Islamic Republic.

Nonetheless, Tehran has been inundated by trade delegations from Europe in recent months. France has led the way, with major deals already lined up for Peugeot and Renault.

Total first signed an agreement in 2004 to develop Phase 11 and a gas plant at South Pars, but it was never finalized.

Under the new deal, Total will control 50.1 percent of the consortium, with CNPC taking a 30 percent stake and Petropars 19.9 percent.

The first phase will cost around $2 billion and consist of 30 wells and two well-head platforms connected to existing onshore treatment facilities.

Iranian officials announced last month that they would invite the first tenders for oil projects within two months and that foreign firms would be allowed to take lead roles.

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The Heads of Agreement (HOA) for the development of Phase 11 of the important South Pars field is worth $6 billion (5.4 billion euros), a ministry spokesman told AFP.

The accord must be finalized within six months, the spokesman added.

The agreement involves a consortium led by Total, which includes the China National Petroleum Corporation (CNPC) and Iran’s Petropars.

The deal marks the return of Total to Iran.

It’s also the first such agreement between Iran and a Western petroleum company after a nuclear deal with world powers took effect in January, lifting some international sanctions.

The offshore South Pars field, shared by Iran and Qatar in the Persian Gulf, contains some 14,000 billion cubic meters of gas – 8 percent of the world’s known reserves.

Iran set to award major gas deal to Total

An official from Iran’s Ministry of Petroleum told AFP that the agreement will be signed on Tuesday (8 November 2016) over the development of South Pars Phase 11 – the same project over which the French major was negotiating with Iran before the US-led sanctions drove it out of the country in 2012.

The accord must be finalized within six months, added the official who has been identified as a spokesman of Iran’s Ministry of Petroleum.

The deal marks the return of Total to Iran. It is also the first such agreement between Iran and a Western petroleum company after a nuclear deal with world powers took effect in January, lifting some international sanctions, AFP added.

Total’s negotiations with NIOC over the development of Phase 11 also included the production of liquefied natural gas (LNG) in what was expected to become Iran’s first such project named Pars LNG. The project, however, was abandoned after the French energy giant had to quit Iran after the sanctions against Iran were intensified. It is still not clear whether the same LNG scheme will be again put on the agenda for the development of Phase 11.

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