Total could back out of Iran’s South Pars 11 amidst new US sanctions

Total could back out of Iran's South Pars 11 amidst new US sanctions
Image courtesy of POGC

Following the US president Donald Trump’s decision to withdraw from the Joint Comprehensive Plan of Action (JCPOA) with Iran, Total has decided to withdraw from the South Pars 11 project. 

On July 4, 2017, Total, together with the other partner Petrochina, executed the contract related to the South Pars 11 (SP11) project, in full compliance with UN resolutions and US, EU and French legislation applicable at the time.

The project is dedicated to the supply of domestic gas to the domestic Iranian market.

However, with the US withdrawal from the deal, Total will not be in a position to continue the SP11 project and will have to unwind all related operations before November 4, 2018, unless Total is granted a specific project waiver by the US authorities with the support of the French and European authorities.

This project waiver should include protection of the company from any secondary sanction as per US legislation.

“Total has always been clear that it cannot afford to be exposed to any secondary sanction, which might include the loss of financing in dollars by US banks for its worldwide operations (US banks are involved in more than 90 percent of Total’s financing operations), the loss of its US shareholders (US shareholders represent more than 30 percent of Total’s shareholding) or the inability to continue its US operations (US assets represent more than 10 billion dollars of capital employed),” the company said in a statement.

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 US authorities to examine the possibility of a project waiver.

Total confirms that its actual spending to date with respect to the SP11 contract is less than €40 million ($47.2 million) in group share.

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