Iran has signed a major agreement with the French energy giant Total for the development of what it says will be the last remaining section of its huge South Pars gas field.
The agreement for the development of Phase 11 of South Pars was signed between the National Iranian Oil Company (NIOC) and Total which would team up with China National Petroleum Corporation (CNPC) and Iran’s Petropars in the project.
The consortium would make a total investment of $4.8 billion in Phase 11 – what is already expected to break the ice for major post-sanctions investments in the country.
Iran expects to produce as much as 56 million cubic meters per day of natural gas from the field once it is in full swing.
A primary target of the project is the construction of a huge platform to increase pressure in the field by using the latest technologies, Shana news agency emphasized in a report.
The development of Phase 11 would be carried out through the new format of Iran’s oil sector contracts and would also require the developers to provide all investments.
Total was negotiating over the development of the same project with the NIOC before the US-led sanctions drove it out of Iran’s oil sector projects in 2012.
Total’s negotiations with NIOC over the development of Phase 11 also included the production of liquefied natural gas (LNG) in what was expected to become Iran’s first such project named Pars LNG. The project, however, was abandoned after the sanctions banned investments by foreign companies in Iran’s oil industry among a series of other draconian economic restrictions imposed against the country.
It is still not clear whether the same LNG scheme will be again put on the agenda for the development of Phase 11.
The NIOC has defined at least 24 phases in South Pars – which hosts the world’s largest independent gas reservoir. So far, 13 phases of South Pars have been made operational and operations to develop the remaining 10 phases that have been awarded to domestic players are still underway.
Based on Iran’s new oil sector contracts, the contractors will be reimbursed for their investments through a share of the project’s production. This is while the previous format of contracts – known as buybacks – envisaged a direct payment by the Iranian government to the contractors.
The new format also envisages awarding different stages of exploration, development and production to contractors as an integrated package, with the emphasis laid on enhanced and improved recovery.