National Iranian Oil Company (NIOC) has inked a Heads of Agreement (HOA) with Total, Petropars, and CNPC today (Tuesday, November 8th, 2016) over the development of South Pars Phase 11 and it would foresee an estimated investment of $6 billion in the project.
The expected production capacity of the project will be 1.8 Bcf per day starting in 2020.
Total will be operator of the phase 11 consortium with the majority interest of 50.1%, alongside Petropars (19.9%), and CNPC (30%).
The first phase of the development include the construction of two wellhead platforms, 30 wells and two sea lines to existing onshore gas treatment plants. The consortium is expected to spend 2 billion USD for this initial phase. Under the terms of this HOA, Total will start the preparation of the call for tender of the contracts which are expected to be awarded in 2017.
In the second phase, the Consortium will design and install the offshore compression facilities necessary to sustain the production level after a few years of operation.
NIOC and the Total-led Consortium will now engage in exclusive discussions in order to finalize the definitive 20-year agreement, under the new Iranian Petroleum Contracts (IPC) and based on the technical and economical terms agreed in the HOA.
The accord marks the return of Total to Iran. It is also the first IPC between Iran and a Western petroleum company after a nuclear deal with world powers took effect in January, lifting some international sanctions.
Total’s negotiations with NIOC over the development of Phase 11 also included the production of liquefied natural gas (LNG) in what was expected to become Iran’s first such project named Pars LNG. The project, however, was abandoned after the French energy giant had to quit Iran after the sanctions against Iran were intensified. It is still not clear whether the same LNG scheme will be again put on the agenda for the development of Phase 11.
Total has had a previous involvement in South Pars, one of the largest natural gas deposits in the world, which is located in the middle of the Persian Gulf. In 1997, Iranian authorities awarded the development of phases 2 & 3 of the field to a Total subsidiary.