Total reaches $4.8bn deal with Iran to develop gas field

The deal follows the lifting of economic sanctions on Iran, which could pave the way for more foreign investment in a largely untapped emerging market.

In January, economic sanctions were lifted after the country agreed to scale back its nuclear activities, in a deal reached with world powers in July 2015.

Total has signed a heads of agreement with the National Iranian Oil Company (NIOC) to develop phase 11 of South Pars, the world's largest gas field, which will produce 1.8bn cubic feet per day, or 370 000 barrels of oil equivalent, and will be fed into Iran's gas network.

Total will operate the project with a 50.1% interest alongside Petropars, a subsidiary of NIOC which will have a 19.9% stake, and Chinese state-owned oil and gas company CNPC with a 30% stake.

As part of the deal, the consortium will conduct negotiations to finalise a 20-year contract within the framework of the Iranian petroleum contract, which was recently approved by the Iranian Parliament.

Total also said it will start engineering studies and a call for tender process so construction contracts can be given immediately when a final agreement is reached.

Patrick Pouyanné, chairman and chief executive of Total, said the agreement followed the company's development of phases two and three of South Pars in the 2000s.

“Total will develop the project in strict compliance with national and international laws and looks forward to working alongside the Chinese state-owned company CNPC in this additional international partnership. This project fits with the group’s strategy of expanding its presence in the Middle East, where the origins of the group lie and growing its gas portfolio by adding low unit cost, long plateau gas assets.”

The SP11 project will be developed in two phases, the first phase, costing around $2bn dollars will consist of 30 wells and two well head platforms connected to existing onshore treatment facilities by two subsea pipelines.

At a later stage, a second phase will be the construction of offshore compression facilities.

Shares in Total were down 0.24% to 42.81p at 1131 GMT.