Total says it will have to leave Iran without sanctions waivers

The French supermajor said it's spent about $47 million to date on Phase 11 of the South Pars gas field, among the biggest in the world.
By Daniel J. Graeber Follow @dan_graeber Contact the Author   |  May 16, 2018 at 10:18 AM
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May 16 (UPI) -- French energy company Total said Wednesday it may have to leave an Iranian gas project unless it gets concessions from the U.S. government.

U.S. President Donald Trump reinstated sanctions on Iran last week, signaling an end to the U.S. involvement in the U.N.-backed agreement that gave Tehran room to maneuver in the energy sector in exchange for nuclear commitments. The U.S. government had acknowledged those sanctions pressures could spill over to European companies and set a 180-day clock ticking on compliance.

Total in July signed a contract with a Chinese partner related to phase 11 of the South Pars gas field off the coast of Iran. The terms at the time were in compliance with European, French and U.S. legislation, but the French company said Wednesday the situation has changed.

"As a consequence and as already explained before, Total will not be in a position to continue the SP11 project and will have to unwind all related operations before Nov. 4 unless Total is granted a specific project waiver by the US authorities with the support of the French and European authorities," the company's statement read. "This project waiver should include protection of the company from any secondary sanction as per U.S. legislation."

CEO Patrick Pouyanné expressed confidence earlier this year that the deal with Iran signed in July is protected from any new U.S. sanctions. Because it was awarded last year under conditions where it could sign the agreement, he said the company should be grandfathered in and get a waiver from U.S. authorities.

Total was among the first of the major European energy companies moving into the Iranian energy sector by signing memoranda of understanding with its Iranian counterparts. On Wednesday, it said it's clear it can't afford any risk that may result in the loss of financing by U.S. banks that could come from secondary sanctions on Iran.

On Tuesday, the U.S. government targeted the head of the Iranian Central Bank, complicating business maneuvers with the Islamic republic.

"In these circumstances, Total will not take any further commitment related to the SP11 project and, in accordance with its contractual commitments vis à vis the Iranian authorities, is engaging with the French and U.S. authorities to examine the possibility of a project waiver," it stated.

Total said its spending to date on the contract has been less than $47 million.

There's been no comment from Iran yet on Total's position.

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