According to the Wall Street Journal, Iran plans to sign a preliminary $6 billion deal with Total SA on Tuesday to help develop an onshore gas field. The move by Total is the first return by a Western energy company since sanctions were lifted this year.
Total was long one of the most active Western oil companies in Iran, and its executives have said they were eager to return to a country with the fourth-largest reserves of oil in the world. Total kept an office open in Iran throughout sanctions and was the first European oil company to buy Iranian oil and ship it to Europe after the restrictions were lifted.
In addition to Total, China National Petroleum Corp (CNPC) will work with Iran’s state-owned Petropars to develop a gas field in the Persian Gulf. CNPC and Total have a head start over competitors, says the Journal, even though CNPC deal may take a few months. Companies have been nervous about working with Iran. Statoil, Royal Dutch Shell, and Repsol left at the beginning of the 2000s because they were “wary of escalating tensions between the Iranian government and western countries over Tehran’s efforts to make a nuclear bomb.” Not exactly a stress-free work environment.
Just last October, however, the Chicago Tribune reported that Western investors have been slow to arrive, leaving Iran no choice but to work with China, despite the Iranian government’s desire to “ease dependence on China” in a time when U.S. sanctions gave them little choice otherwise.
Western investors have been slow to arrive, forcing Iran back into the arms of the Chinese. That’s especially true in the energy sector, where pressure to increase production is intense. Elsewhere, Western clearing banks still refuse to do business with Iran for fear of falling foul of non-nuclear U.S. sanctions that remain in effect, meaning Western companies can’t raise project finance.
It appears Iran should be ecstatic to see investors beginning to find their way back, with potentially large projects on the horizon.