Total pulls out of Iran gas project

Background

Total is a multinational oil and gas company based in Courbevoie, France. Total has operations in over 130 countries and is the fourth largest oil and gas company in the world.

The Iran nuclear deal, also known as the JCPOA (Joint Comprehensive Plan of Action) was signed by Iran and major powers Britain, China, France, Germany, Russia, and the United States (the P5+1) in 2015. The deal was a result of almost a decade of sanctions due to Iran’s non-compliance with the Nuclear Non-Proliferation Treaty. Between 2006 and 2015, Iran lost an estimated $100 billion in oil revenue alone. According to the JCPOA, Iran would limit its nuclear ambitions in return for relief from a number of sanctions for at least 10 years. The IAEA declared that Iran had complied with the terms of the provisional agreement and sanctions were lifted in 2016. Read more on the nuclear deal here.

Total pulls out of Iran gas project

Analysis

In 2017, Total signed a contract to develop phase 11 of Iran’s South Pars field with an initial investment of $1 billion.

"Total will not continue the SP11 (South Pars 11) project and will have to unwind all related operations before 4 November 2018, unless Total is granted a specific project waiver by US authorities with the support of the French and European authorities," the French oil and gas company said in a statement. Total’s announcement comes after German insurer Allianz (ALVG.DE) and Danish oil product tanker operator Maersk Tankers said they were winding down their businesses in Iran. Iran has said “it may start enriching uranium again if it can no longer see any economic benefit to the deal.”

Total pulls out of Iran gas project

Assessment

Our assessment is that Total’s statement is significant as it one of the largest stakes in Iran. We believe that China could be a major beneficiary of Washington’s withdrawal from the JCPOA. Beijing could use this as an opportunity to strengthen the Petro-yuan. However, changes in supply in Iran could lead to supply shortages across the world. The re-imposition of sanctions has increased the risk of conflict in the Middle East. As the second largest importer of oil from Iran, this could adversely affect India. As stated previously, India will spend approximately $1.3 billion more every year for a one dollar per barrel increase in crude prices.

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