China may take over gas project in Iran if France's Total pulls out

Chinese energy giant CNPC could take over Total’s stake in a major Iranian gas project if the French company is forced to leave Iran over any new US sanctions, sources told Reuters.

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Total signed the $1 billion deal to develop the South Pars gas field this year. According to the company, the project will produce two billion cubic feet a day or 400,000 barrels of oil equivalent including condensate.

Under the terms of the agreement to develop phase 11 of South Pars, the world’s largest gas field, CNPC could take over Total’s 50.1 percent stake and become the operator if the French energy major is forced to withdraw, a senior Beijing-based source with knowledge of the joint-venture agreement told Reuters.

CNPC has a 30 percent stake in the project, while the Iranian national oil company’s subsidiary PetroPars holds the remaining 19.9 percent.

“In the case of a Total withdrawal, CNPC may need to bring in CNOOC [China’s largest offshore operator – Ed.] because CNPC has little experience offshore,” said an unnamed senior Chinese industry official.

The deal was the first investment of its kind since sanctions on Iran were relaxed in 2016 after the Islamic Republic promised to roll back its nuclear program.

However, US President Donald Trump has accused Tehran of violating the nuclear accord, saying he would no longer certify the lifting of sanctions was in Washington’s interests. The Congress will have to vote on whether to reimpose sanctions on Iran.

A senior official at Total said the company has “some mechanism that permits us to exit the deal softly if forced to by international sanctions.”

When signing the agreement with Iran in July, Total’s chief executive Patrick Pouyanne said he was aware it would be a “bumpy” road. “But I prefer to have a problem to solve and to have the opportunity rather than having not signed [and] no opportunities,” he added.