French oil major Total has said it would not be able to continue with its project in Iran without a waiver protecting it from US sanctions after the Trump administration pulled out of the nuclear deal.
Total signed a multibillion-dollar deal last July to develop the giant South Pars gasfield. Although Total said it has so far invested less than €40m in South Pars, it still represents a larger commitment in Iran than any other western energy group and it was the Islamic republic’s first major energy contract with a European oil company in more than a decade.
In a statement on Wednesday, the energy company said it “will not be in a position to continue the SP11 [South Pars] project and will have to unwind all related operations before 4 November 2018 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.”
Total said that it has “always been clear that it cannot afford to be exposed to any secondary sanction” due to the risk of loss of financing, the loss of its US shareholders or the inability to continue its US operations — US banks are involved in more than 90 per cent of Total’s financing operations, according to the company.
“In these circumstances, Total will not take any further commitment related to the SP11 project and, in accordance with its contractual commitments vis à vis the Iranian authorities, is engaging with the French and US authorities to examine the possibility of a project waiver,” added Total
Total owns just over half of the South Pars project with China’s state-owned CNPC taking another 30 per cent. According to people familiar with the situation, if the French oil company cannot secure an exemption that allows it to remain in the country and it is forced to withdraw, CNPC could take over Total’s stake in the project, provided that the Chinese company was itself able to avoid sanctions.