Total, CNPC Sign $4.8b Gas Agreement With NIOC

National Iranian Oil Company on Tuesday signed a preliminary $4.8 billion agreement with Total S.A. and China National Petroleum Corporation to develop Phase 11 of South Pars Gas Field in the Persian Gulf.

Petropars, a subsidiary of the NIOC, will be part of the project with a 19.9% stake. Total would be the majority shareholder with a 50.1% and CNPC has a 30% stake, IRNA reported.

"Total says it can raise gas production (from Phase 11) to around 51 million cubic meters per day in 20 years. Improving the rate of recovery is the most important aspect of collaboration with Total and CNPC," Gholamreza Manouchehri, the deputy head of NIOC, said on Tuesday.

Early production is expected to begin 40 months after the start of operations.

He added that Phase 11 holds around 16 billion cubic meters of natural gas and some 834 million barrels of gas condensates, a type of ultra light crude.

"Average recovery rate of Iran's oil and gas fields is around 25% but we need to enhance the rate to 40% in 15 years which would increase the value of total oil and gas reserves by $6 trillion."

"This is an agreement in principle. The final contract will be signed early 2017," Reuters quoted the managing director of Pars Oil and Gas Company, Mohammad Meshkinfam, as saying, citing ISNA on Tuesday.

According to a statement on Total's website, the Phase 11 project will be developed in two parts. The first, with an estimated total cost of $2 billion, will consist of 30 wells and two well head platforms connected to existing onshore treatment facilities by two subsea pipelines.

The second part, involving the construction of offshore compression facilities, will be launched subject to reservoir conditions.

------- Rekindling Ties

The agreement is the latest attempt to complete one of the least-developed phases of South Pars which has been plagued by years of procrastination significant progress in developing the megaproject that consists of 24 phases.

According to reports, Total had designed the well heads for Phase 11 but did not get involved  in the operational works following the increase in  tensions between Iran and the West over Tehran's nuclear program.

“Following Total’s successful development of phases 2 and 3 of South Pars in the 2000s, the group is back to Iran to develop and produce another phase of this giant gas field. Total is delighted to have been selected by NIOC," Patrick Pouyanne, chairman and the chief executive officer of Total, who was absent in the signing ceremony, said in a statement.

"This project fits with the group's strategy of expanding its presence in the Middle East … and growing its gas portfolio by adding low unit cost, long plateau gas assets," Pouyanne said, stressing that the French energy group will develop the project "in strict compliance with national and international laws."

Tehran hopes to raise its natural gas output from South Pars to 900 million cubic meters per day by March 2017 to match Qatar's rate of extraction and ramp up production by a further 100,000 cubic meters a day in the following year.

South Pars is the world's largest gas field, shared between Iran and Qatar, covering an area of 3,700 square kilometers of Iran's territorial waters in the Persian Gulf. The field is estimated to contain 14 trillion cubic meters of gas and 18 billion barrels of gas condensate. It adjoins Qatar’s North Field, which measures 6,000 square kilometers.