Total to quit Iran gas deal after U.S. reactivated sanctions

French oil company Total has announced it will withdraw from the SP11 gas project

By Erika Hidalgo Lopez

16/05/2018

French oil company Total has announced it will withdraw from the South Pars 11 (SP11) gas project it operates with Petrochina in Iran. In a press statement, it stated it would not move forward with the SP11 project and will have to unwind all related operations before November 4, 2018.

Nonetheless, the French oil company left an open door, indicating it would withdraw from Iran “unless Total is granted a specific project waiver by the US authorities with the support of the French and European authorities. This project waiver should include protection of the Company from any secondary sanction as per US legislation.”

The decision was made after Donald Trump announced that the U.S. would exit the Joint Comprehensive Plan of Action (JCPOA) or Nuclear Pact with Iran and signed by China, France, Germany, Russia, United Kingdom, and United States in July 2015. Furthermore, it warned if the reimplementation of U.S. sanctions against Iran.

Total clarifies it has been in full compliance with the pact. It highlights that, in 2017, together with the other partner Petrochina, executed the contract related to the South Pars 11 (SP11) project, in full compliance with UN resolutions and US, EU and French legislation applicable at the time.

It also stated that SP11 is a gas development project dedicated to the supply of domestic gas to the domestic Iranian market and for which Total has voluntarily implemented an IRGC-free policy for all contractors participating in the project, thereby contributing to the international policy to restrain the field of influence of the IRGC.

Total assures it will not risk its U.S. businesses

The company claims it is clear that it cannot afford to be exposed to any secondary sanction. Nor will it risk the loss of financing in dollars by U.S. banks for its worldwide operations. Total explains that U.S. banks are involved in more than 90 percent of Total’s financing operations.

It can also not afford to lose its U.S. shareholders, who represent more than 30 percent of the company’s shares. Total especially wishes to avoid the inability to continue its U.S. operations. The company says that U.S. assets represent more than $10 billion of capital employed.

Total will not assume any further commitment related to the SP11 project beyond its contractual commitments. Meanwhile, it is engaging with French, Iranian, and U.S. authorities to examine the possibility of a project waiver.

Total has confirmed that, actual spending to date with respect to the SP11 contract is less than 40 million euros in Group share. Furthermore, considering the various growth opportunities which have been captured by Total in recent months, it confirms that a withdrawal from SP11 would not affect its production growth target of 5 percent CAGR between 2016 and 2022.

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