Oil and Gas

Iran sanctions uncertainty puts major oil companies in ‘wait-and-see’ mode

Key Points
  • Amir Hossein Zamaninia said Iran was currently negotiating with more than 15 companies from Europe, Russia and Asia
  • The contracts would open the country to massive oil and gas exploration, development and production
The South Pars gas field is pictured in Assaluyeh, Iran.
Raheb Homavandi | Reuters

Iran might appear to be increasingly isolated on the global stage but the country's deputy oil minister said Tuesday that it is on the verge of signing deals with major global oil and gas companies.

Speaking in London, Amir Hossein Zamaninia said Iran was currently negotiating with more than 15 companies from Europe, Russia and Asia to conclude contracts that will open the country to massive oil and gas exploration, development and production.

"These are not overambitious figures and expectations," he told the 'Oil and Money' conference in the U.K. capital. "Our policy is to be able to manage and finalize at least 10 contracts by the end of the Iranian year (March 2018)."

He said Iran had so far signed "memorandums of understanding" (investment intentions) for 28 different projects with companies including Total, Eni and Shell, Russian firms Rosneft and Lukoil, and China's Sinopec and China National Petroleum (CNPC), among others.

Iran's oil and gas development deal with Total is perhaps the most noteworthy. Signed in July, the $4.8 billion agreement will see the French oil and gas major develop and operate, along with CNPC and Iran's Petropars, the giant South Pars (SP11) project, the world's largest gas field.

The project will have a production capacity of 2 billion cubic feet per day or 400,000 barrels of oil equivalent per day, Total said in July, and the produced gas will supply the Iranian domestic market, starting in 2021.

Zamaninia's comments come as Iran is under scrutiny amid growing tensions with the U.S. and the possibility that the U.S. could revoke an international nuclear pact, agreed during former President Barack Obama's administration, that brought Iran in from the cold, diplomatically.

U.S. President Donald Trump has threatened to terminate the agreement and if the U.S. Congress agrees, Iran could be placed under renewed sanctions, affecting international companies' ability to do business in and with the oil-rich country.

For his part, Iran's Supreme Leader Ayatollah Ali Khamenei said Wednesday that Tehran would stick to its 2015 nuclear deal with world powers as long as the other signatories respected it, but would "shred it" if the U.S. pulled out, state TV reported, according to Reuters.

Iran's deputy oil minister was unperturbed, however, playing down the potential impact of U.S. sanctions. "It has little or no effect on our future plan in the oil industry… I am ready for negotiations with oil companies."

Whether renewed instability and potential sanctions could damage its attraction to global oil companies looking to expand in the Middle East and exploit Iran's recent return to the oil market, following the lifting of U.S. and European sanctions last year, remains to be seen.

Total's chairman and chief executive Patrick Pouyanne said Wednesday that Total was a "pioneer" in Iran and that the company was "committed" to the deal. However, he added that the company is going "step by step" in Iran and that it was watching the situation carefully.

"We were right to sign the Iran deal and it gave us a clear boost… having said that, I see what's happening in the U.S. and we have to look at the fact that we are governed by laws and no one knows what Congress will decide," he told the Oil and Money conference in London.

"If the framework changes, if we can legally do and execute the contract we will do that. There are huge opportunities in Iran. But let's see if we can do that initial project first."

Related Tags