China to take lead in world's top gas field as US reimposes Iran sanctions

China National Petroleum Corp. is expected to take the lead on a $5 billion project to develop Iran’s share of the world’s biggest gas deposit, taking over from France’s Total SA, which halted operations after US President Donald Trump reimposed sanctions on the Islamic Republic.

State-owned CNPC, which had joined an original consortium involving Total and Iran’s Petropars Ltd. in 2016 to develop Phase 11 of the South Pars Gas field in the Persian Gulf, is set to increase its stake in the project from the current 30 per cent . Total had originally agreed to take a 50.1 per cent stake in the development.

CNCP will become lead operating partner in the project, state-run Islamic Republic News Agency said, citing Mohammad Mostafavi, National Iranian Oil Company investments and business head. Terms of the contract have not yet officially changed, according to Shana, the oil ministry’s official news site. Calls to CNPC went unanswered on Sunday and a company spokesman didn’t immediately respond to a Bloomberg News email requesting comment.

Total, which finalized its agreement with Iran in July 2017, had already spent some 40 million euros ($45.7 million) on the project when Trump announced in May that the US would exit the 2015 nuclear deal, formally known as the Joint Comprehensive Plan of Action, and reimpose sanctions on Tehran lifted after the accord was signed.

The first round of US sanctions was put back into place this week, with more to come in November, greatly complicating efforts by companies that rushed into Iran after the 2015 nuclear accord was signed by Iran, the US and five other countries plus the European Union.

Under the deal, Iran agreed to take steps to limit its nuclear program, and to submit to verification by the International Atomic Energy Agency in return for economic sanctions relief.

Scores of European companies, including Total, have withdrawn their operations and investments from the oil-rich Persian Gulf country since the US reversal. Trump marked the return of sanctions with a tweet on Aug. 7: “Anyone doing business with Iran will NOT be doing business with the United States.”

Iran, which holds the world’s largest gas reserves, shares South Pars, also known as the North Dome field, with neighboring Qatar. 

Total had previously withdrawn from South Pars in 2009 because of sanctions. It planned an initial investment of $1 billion for Phase 11, with the aim of eventually producing 2 billion cubic feet a day, or 400,000 barrels of oil equivalent a day including condensate, the company said in a statement in July 2017. At the time, Total said the contract had a 20-year duration.

CNPC has been active in Iran since 2004, operating in oil, gas and oil-field services, according to the company’s website. In 2006, it was awarded a three-year contract to provide offshore well-logging and other services at South Pars.