Iran has signed the first international petroleum contract for 10 years to open South Pars gas reserves in a US$5 billion project. This will be a boost for the region’s offshore vessel market and LNG projects.
The South Pars Phase 11 consortium, composed of Total, China National Petroleum and Petropars are being given a 20-year contract that will drive the consortium to invest US$5 billion in offshore infrastructure, pipelines and onshore facilities.
Total chairman and chief executive Patrick Pouyanné said the contract and project are significant for the company and Iran. “This is a major agreement for Total, which officially marks our return to Iran to open a new page in the history of our partnership with the country,” he said. “This project is in line with the group’s strategy to expand its presence in the Middle East and grow its gas portfolio by adding low cost, long plateau assets.”
South Pars 11 will be developed in two phases. According to Total, the first phase, with an estimated cost of around US$2 billion, will consist of 30 wells and two wellhead platforms connected to existing onshore treatment facilities by two subsea pipelines. A second phase will be launched involving the construction of offshore compression facilities on the South Pars field.
Wood Mackenzie senior research analyst Homayoun Falakshahi said this was a significant event for Iran's oil and gas industry. “The South Pars Phase 11 deal will, Iran hopes, prompt other international oil companies to re-enter the country’s upstream sector.” Future developments could trigger an LNG export project in Iran, one that has been mooted and postponed multiple times in the last 20 years.
Mr Falakshahi added: “Phase 11 opens a new chapter in the story of the South Pars. It closes the 24-phase development plan, and sets the stage for future phases, as compressor platforms are needed for the first time.”
Gas from Phase 11 is earmarked for the domestic market. However, increased gas production opens new opportunities for piped exports and LNG, said Mr Falakshahi. Iran started test exports to Iraq two weeks ago. Iran LNG is the country’s only ongoing LNG project. More than US$2 billion was invested in the project before international sanctions took hold. Total expressed interest in relaunching in the project.