Total Chief Executive Patrick Pouyanne who is preparing to sign a major gas contract with Iran has hailed the country’s new format of oil sector agreements as “a real improvement”.
Pouyanne told Reuters in an interview that the terms of Iran’s new oil sector agreements were “significantly better” than those for the country’s previous format of agreements.
He said one specific advantage was the fact that the operators would be offered remuneration based on production rather than a simple percentage of the development costs.
It also extends over a period of 20 years rather than seven or eight. This, he said, was a real improvement. "We will not go to Iran if there is not a reward which is commensurate."
Pouyanne further said his company would go ahead with the development of Iran’s South Pars Phase 11 – a project which it had been negotiation with the National Iranian Oil Company (NIOC) – with an initial investment of $1 billion.
The decision, he said, was meant to reduce the risks for Total from US sanctions against Iran.
"It is worth taking the risk at $1 billion because it opens a huge market. We are perfectly conscious of some risks. We have taken into account (sanctions) snap-backs, we have to take into account regulation changes," Pouyanne told Reuters.
With US sanctions still in place prohibiting trading with Iran in dollars, Total will finance the project in euros from its own resources, added the report.
Gas from South Pars will supply only the fast-growing domestic Iranian market and none will be exported, Pouyanne emphasized. Total will be paid not in cash but in condensate, a very light crude oil which is a by-product of gas production.
He further said that Total was also considering a petrochemicals project in Iran which would require external financing from Asian banks, although this “remains in less advanced stage”.