October 9, 2019
Iran relies heavily on China trade but it it was no surprise that the state-owned China National Petroleum Corp. (CNPC) pulled out of a $5 billion natural-gas project — the second phase of the South Pars feld.
South Pars is the world’s largest gas field which Iran shares with Qatar.
The withdrawal of China effectively kills off Iran’s last hopes in developing this strategically important resource after France’s Total also exited the project in May of last year.
Just a few months earlier, the Iranian oil minister pledged that Iran would be able to produce an additional 140 million cubic meters of gas from South Pars after only one year. Of course, that was never achieved and looks more unrealistic than ever following the departure of these two energy giants from the scene.
Tehran had invested much hope in CNPC filling the void left by Total following the reintroduction of sanctions by the US. Iran desperately needs additional gas to meet rising domestic consumption.
Total, which originally signed an agreement to develop phase 11 of South Pars in July 2017, was the first major western company to invest in Iran since the lifting of sanctions imposed on Tehran.Tehran had invested much hope in CNPC filling the void left by Total following the reintroduction of sanctions by the US.
The French oil major had a 50.1 percent stake in the project. CNPC meanwhile held a 30 percent stake while Petropars, a local Iranian outfit owned by the National Iranian Oil Company, held a 19.9 percent stake.
So now the Iranian partner is the last man standing, shouldering the responsibility of developing the project without any of the financing or technical expertise of either CNPC or Total.
The withdrawal of the French company from the project came despite EU efforts to maintain the nuclear agreement and allow Iran to continue exporting oil and investing in upstream energy projects.
Brussels will not be able to protect Iran from economic sanctions despite its best efforts and European companies thinking about doing business with Tehran should pause to think about the potential consequences.