Total halts $2 billion gas project in Iran

17 May, 2018, 14:39 | Author: Terri Saunders
  • EU Commission takes steps to protect EU business in Iran

China ready to replace Total in Iran - report Chinese energy giant CNPC is willing to buy French firm Total's stake in the Iranian South Pars gas project should the latter decide to quit because of U.S. sanctions against Tehran, Reuters reports.

"Total has always been clear that it can not afford to be exposed to any secondary sanction which might include the loss of financing in dollars by United States banks for its worldwide operations", the group said.

Total's announcement comes after German insurer Allianz (ALVG.DE) and Danish oil product tanker operator Maersk Tankers said they were winding down their businesses in Iran.

By contrast, Total said it had spent less than 40 million euros ($47 million) on the Iranian project, which it runs with its partner Petrochina and which is dedicated to the supply of domestic gas inside Iran.

When the Iran agreement was signed and sanctions were ended, Total was among the first corporations to sign business agreements with the Iranian government.

In a deal first signed in late 2016, Total agreed to operate the South Pars project with a stake of 50.1%.

LONDON-European firms have started pulling back investment and abandoning commitments in Iran, responding to a decision last week to reimpose broad American sanctions on Tehran by year end.

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In a statement, Total said it "will have to unwind all related operations" before November 4, unless it's granted a specific waiver by United States authorities that would protect it against sanctions. Total does about 30 percent of its business through the United States banking system.

France, Britain and Germany had vowed earlier this week to keep the 2015 nuclear deal alive by trying to keep Iran's oil and investment flowing, but admitted they would struggle to provide the guarantees Tehran seeks.

Zanganeh said that Total will not face any fine if it withdraws, but the investment it has so far made in the project will not be repaid until full implementation of the project. Joe Kaeser, the CEO of Germany's Siemens (SIEGn.DE), told CNN his company would not be able to do any new business with Tehran.

An official in the French finance ministry said "precise requests" were being lodged with the US authorities, including for Total, and that the company's decision was not a surprise.

These renewed sanctions imposed by President Trump have left some major European companies in a quandary as to what to do with their business operations.

Industry sources told Reuters this week that China's CNPC, which holds a 30 percent stake in the South Pars project, was ready to take over Total's majority stake in the project if it pulled out.

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