Iran Oil Minister Says Total Cannot Drop Major Binding Gas Deal Under U.S. Pressures

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, Financial Tribune reports.

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.

Behrouz Nemati, the spokesperson of Majlis Presiding Board said that 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.”

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

“Either we can do the deal legally if there is a legal framework,” Patrick Pouyanne said in remarks made to CNN Money Emerging Markets. “If we cannot do that for legal reasons, because of change of regime of sanctions, then we have to revisit it.”

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.

Total became the first Western oil major to sign an agreement with Iran to develop phase 11 of Iran’s South Pars – the world’s largest gas field. It also increased its U.S. presence on November 8 when it announced a deal to buy the liquefied natural gas (LNG) assets of energy group Engie, including its stake in the Cameron LNG project in Louisiana.

Iran has repeatedly said the Total/South Pars transaction demonstrated the success of the nuclear deal, hoping that other major western and Asian firms would sign agreements with Iran. However, given the fear of possible U.S. sanctions, western firms and major international banks have still shied away from the country. Pouyanne said that until the U.S. made its decision, it would push ahead with the South Pars deal, repeating that the company hoped for first contracts by January.

The South Pars field is a natural gas condensate field located in the Persian Gulf. It is the world’s largest gas field shared between Iran and Qatar. According to the International Energy Agency, the field holds estimated 51 trillion cubic meters of in-situ natural gas and some 50 billion barrels of natural gas condensate. Losing Total would be a huge blow for Iran. Tehran needs foreign investment to develop its vast energy potential and it was recently touting projects worth $200 billion in the hope of attracting companies such as BP (BP), Russia’s Gazprom (GZPFY) and Petronas of Malaysia.