The political world of Iranian gas development

Iran’s South Pars gas field has long been the subject of difficult negotiations, made more difficult by US-led crackdown, launched under the previous administration, on Iranian investments. Meanwhile, the terms demanded by Iran are also viewed as too onerous by some of the oil majors.

Shell and Repsol last year pulled out of plans to invest in phase 13 of South Pars, and not long afterwards French peer Total said it would hold off making fresh investments because of the “extremely delicate” political environment. This looked like posing a problem for Iran, as gas liquefaction requires substantial technical expertise that is difficult to get without involvement from a big international oil company.

Reports in the past week have suggested CNPC had taken over the role in the upstream project, and today Petronas said it was still going to be involved and would work with CNPC, which would further suggest  Total is firmly out of the picture.

But the story is not quite so simple.

Worth noting first is that the project being discussed involves two components: South Pars 11, an upstream/exploration and production element; and the downstream LNG liquefaction plant, shipping, marketing and re-gasification.

The CNPC investment isn’t 100 per cent confirmed – though it’s not at all unbelievable.

Finally, Total says it is still in talks on both the upstream and downstream parts of the project. Involvement only in the downstream side would likely be less financially appealing to Total, and taking feedstock recovered and supplied by another company is not what the integrated majors like to do.

Then there is the question of the new US administration. Is it going to put so much pressure on those international oil companies not to contribute their technology to Iranian gas projects? If talks with Total are still ongoing, then perhaps Iran is trying to find out.

Related stories:

Field of dreams: how sanctions hinder Iran’s gas ambitions (FT, 24/06/08)
Iran vows to press on after Total pulls out (FT, 10/07/08)

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