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August 2011, No. 61


Exclusive 16th International Oil Show

Sanctions Won't Last Forever

The French Total company once signed a contract with Iran despite international sanctions to develop phases 2 and 3 of South Pars gas field. Bernard Sudreau is now running the sole Western oil company that has not downsized its Tehran office. The following interview with Sudreau contains interesting points.


We are here for capital return from the said project. On the other hand, sanctions won't last forever and we are looking forward to their lifting.


Mr. Bernard Sudreau, you have heard that in the opening ceremony of the 16th International Oil and Gas Exhibition in Tehran both the first vice president and minister of petroleum invited foreign companies to invest in Iran's oil projects. As the first question, I would like to know your opinion about that invitation?

Total is a European company and has to comply with regulations passed by the European Union. However, we are committed to all contracts we have signed with Iran before July 2010 because the European sanctions went on effect in July 2010. Thenceforth we should observe the sanctions, but this does not mean that we are not willing to operate on new projects in Iran.

So, you have not undertaken new projects in Iran after July 2010?

That's true. We will do no more projects, but projects whose contracts were signed prior to that date will continue.

I don't think that Total has any contracts which have not ended before July 2010. What contracts you are talking about?

Total was willing to sign contracts with Iran before that date. If no contract was signed it was due to dawdling on the part of the Iranian Ministry of Petroleum. We were totally ready to sign contracts with Iran before that date. Contract signing, however, needs mutual consent and can't be unilateral. If we did not sign any contracts before July 2010, it was not due to the US sanctions or other sanctions. Before that date we were not affected by sanctions. No contract was signed because no agreement was reached to form the basis for a contract.

Total is currently operating on no projects in Iran. Is that so?

Yes. We are operating on no new projects in Iran. Our last project was development of Doroud oil field, which was finished in 2008. We have not settled financial scores for the implementation of Sirri, Belal, and Doroud projects as well as phases 2 and 3 of South Pars gas field. I mean, we are in the phase of capital return from those projects.

Total was facing problems in Doroud and oil production from that field was not totally in line with the contract. How many barrels per day of oil the field was producing when you commissioned the project?

As per the contract, the field was commissioned in 2008. You should ask that question from the client. Doroud was the first output rise project.

Why Total is still keeping its office in Iran? You cannot operate on new projects and previous projects have been all finished.

We are here for capital return from the said project. On the other hand, sanctions won't last forever and we are looking forward to their lifting. At present, Total cannot sign contracts with Iran, but this does not prevent us from negotiating future project with the Iranians and keeping in touch with them.

Mr. Sudreau, don't you think that such sanctions will also harm oil majors? Iran possesses one of the biggest oil reserves in the world and there is a lot of room for work here. When big international oil companies like Total are away, they will be easily replaced by Chinese ones. It seems that although sanctions have caused difficulties for the Iranian oil industry, they have also kept oil majors away from a premium market like Iran.

Total specialized in oil and gas exploration and production. Therefore, it would be very good for us to have more and more projects. Iran, on the other hand, enjoys enormous oil and gas reserves. Unfortunately, we cannot operate on new projects in your country. As you said, contracts that we lost were reassigned to Chinese and other oriental companies. But what is lost is lost.

Total had great stakes in Iran. Did the French government even ask about Total's opinion about the European Union sanctions?

You should understand that these are the European Union's sanctions and France, even if opposed to the sanctions, has only one vote.

In one case, at least, I remember that a Chinese company signed a major contract with Iran and then introduced an international company as its partner. I mean Yadavaran project which was given to the Chinese Sinopec which, in turn, chose the Shell as partner. I want to know is there any possibility for you to work for the Chinese behind the scenes without directly investing in Iran?

This has been forbidden by sanctions. Shell also left Yadavaran after the sanctions went into effect.

Suppose that the sanctions were lifted today, what projects would Total be willing to have a share of?

Any project which is economically viable and on which both the client and the contractor could reach an agreement.

Like what projects?

We had progressed well on Pars LNG project and a lot of engineering operations had been done. If the sanctions were lifted tomorrow, that would be an important project for us. Otherwise, we would accept other oil and gas projects.

As you know, the Iranian Ministry of Petroleum has given up LNG projects in favor of gas export via pipeline. Have you noticed that?

This idea has been on the table since 10 years ago. Iran can work in both ways. This alternative could have been viable before the earthquake in Japan, but after the earthquake, problems in Japan may affect the balance of gas delivery.

If sanctions were lifted, would Total be willing to invest in the Caspian Sea projects?

If there were remarkable projects, yes, we would be ready. Total is working with Kazakhstan and Azerbaijan in the Caspian Sea. If worthwhile projects are offered here, why not?

What about development of Arash gas field which is shared with Kuwait. Are you willing to invest on it?

At present, we cannot take part in any new projects. We must wait and see when the sanctions are lifted.

 

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  August 2011
No. 61