Iran Oil Minister Plays Down Total's Exit From Binding Gas Deal

Iranian Oil Minister Bijan Namdar Zanganeh says Total S.A.'s contract with Tehran to develop Phase 11 of the South Pars Gas Field is "legally binding" and the French energy major cannot walk away from the deal under normal circumstances.

Zanganeh made the remark on Saturday on the sidelines of a meeting with Alisher Sultanov, Uzbekistan's deputy prime minister, in response to statements that the gas deal with the world's fourth biggest oil company could hit a roadblock, IRNA reported.

"It is regrettable that some people still desire Total to break its agreement," Zanganeh said, noting that those who have opposed the deal from the beginning try to purposefully mistranslate the news about Total's presence in Iran to sow uncertainty in the public and prove that the deal would not be successful.

Pointing to the terms of the contract, the official noted, "As per the agreement, the French major can cancel the deal only if the United Nations Security Council imposes new international sanctions against Iran."

According to Zanganeh, it is unlikely that the French giant abandons the project. Based on the terms of the contract, Total's revenue is contingent upon gas production from Phase 11. Therefore, as long as the project is not fully implemented, they will earn no money.

"Total has started implementing the gas project in the Persian Gulf and more contracts are being planned," he said.

"Because Phase 11 agreement has been signed under the new Iran Petroleum Contract model, in case Total terminates the deal unilaterally, it must pay compensation," Behrouz Nemati, the spokesperson of Majlis Presiding Board said.

Total CEO Patrick Pouyanne said last week that his company will try to push ahead with the South Pars project if the US decides to impose unilateral sanctions, adding that Total will comply with any law that obliges it to withdraw from Iran.

Total, one of the world’s seven supermajors, signed a $4.8 billion contract in July to develop Phase 11 of the giant South Pars Gas Field that is shared between Iran and Qatar in the Persian Gulf.                    

The French oil and gas company will collaborate with China National Petroleum Corp and Iran’s state-owned firm Petropars to produce 2 billion cubic feet, or 56 million cubic meters per day of natural gas from SP Phase 11.

Oil Customer

Zanganeh also noted that Uzbekistan is willing to purchase Iran's crude oil and serious talks are underway to study the full details of selling oil to the Central Asian country in the near future.

According to Zanganeh, exporting oil to the neighboring Central Asian state can strengthen ties between Tehran and Tashkent, as the enhancement of bilateral relations would serve the two countries' mutual interests.

Highlighting Uzbekistan's interest in Iran's upstream and petrochemical ventures, Zanganeh expressed hope that negotiations will yield positive results.

In a meeting with Uzbek Foreign Minister Abdulaziz Kamilov last month in Tehran, Zanganeh noted that Tashkent's limited oil resources has prompted the country to look for new energy suppliers, particularly those in the Middle East.

Pointing to Uzbekistan's lack of access to international waters, the minister added, "The commodity should be exported by land, possibly via railroad, yet the feasibility of other methods should also be assessed."

Iran's crude output has almost climbed to the pre-sanctions level of around 4 million barrels per day and is slated to rise to 4.7 million bpd in four years. Under the sanctions, Iran lost more than one-third of its oil production capacity, as output declined to 2.5 million barrels a day.