Published: Thu, May 17, 2018
Money | By Armando Alvarado

French oil firm Total says it may discontinue project in Iran

French oil firm Total says it may discontinue project in Iran

Total (TOTF.PA) will pull out of a multibillion-dollar gas project in Iran if it can not secure a waiver from US sanctions, the French energy company said on Wednesday.

French energy giant Total joined other major European companies in saying they will exit Iran unless USA sanctions are waived, casting a shadow over efforts by European leaders to salvage the Iran nuclear deal.

It signed a deal previous year to develop the South Pars gasfield with an initial billion-dollar investment.

Trump's May 8 announcement that he would snap back all sanctions on Iran that were in place before the nuclear deal means that those banks would no longer be accessible to Total, or to any other foreign companies, should they continue to engage in the Iranian marketplace.

"Total will not be in a position to continue the SP11 project and will have to unwind all related operations before 4 November 2018 unless Total is granted a specific project waiver by the United States authorities with the support of the French and European authorities", the French group said in a statement. Russian Federation has also said it remains committed to the deal.

Total said any waiver would need to include protection from secondary sanctions that Washington might impose on companies that continue to do business with Iran.

The oil major fears loss of financing in dollars by USA banks for its worldwide operations (U.S. banks are involved in more than 90% of Total's financing operations), the loss of its US shareholders (they represent more than 30% of shareholders) or the inability to continue its USA operations, with over $10 billion of capital employed in USA assets.

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The United States in the past has fined European and Asian banks and businesses billions of dollars for violating its sanctions.

The EU's top energy official, Commissioner Miguel Arias Canete, is heading to Iran for talks from May 18 to 21 to discuss ways of trying to overcome renewed US sanctions against Iran's oil industry.

Denmark's Maersk Tankers, a major global shipping company whose oil tankers help carry Iran's oil exports to Asian markets, has also announced that it will wind down its business with Iran by November.

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. "With that in mind it's a logical decision".

A withdrawal from the Iran project would not affect Total's current overall production targets as the group had since opened up other growth opportunities, it said.

Iranian oil minister Bijan Zanganeh said the French firm would not pay a penalty if it pulled out of the project.

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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