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Total to drop billion-dollar Iranian gas project unless United States waives sanctions

Total to drop billion-dollar Iranian gas project unless United States waives sanctions

French oil and energy company Total said on Wednesday that may pull out of the Iran South Pars 11 energy project, in light of a decision by US President Donald Trump to withdraw from an global nuclear deal with Iran.

Total started the South Pars 11 project in July 2017, two years after Western powers signed a nuclear deal with Tehran.

"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 USA authorities with the support of the French and European authorities", the French oil and gas major said in a statement.

Total was the latest of several European companies to announce plans to withdraw from Iran after the U.S. Treasury gave foreign companies notice last week that they have three to six months to "wind down" their business with Tehran before they face possible penalties for violating U.S. sanctions.

Continuing to do business in Iran would be too great a risk as the company has large operations in the USA and depends on the country's banks for financing its operations, Total said in a statement Wednesday. The European Union, also a signatory to the atomic deal, has pledged to take steps to salvage the accord.

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

U.S. banks are involved in more than 90% of Total?s financing operations, Total said, adding that U.S. assets represent more than $10 billion of capital employed and that 30% of its shareholders are in the US.

France, Germany and Britain are leading a European effort to safeguard Europe's economic interests but have few options that pose any threat to the United States.

The EU's top energy official, Commissioner Miguel Arias Canete, is heading to Iran for talks from May 18 to 21 to discuss ways of trying to overcome renewed USA sanctions against Iran's oil industry. "They have us by the throat because so much business is conducted and cleared in dollars", one European investment banker said.

The company said on Wednesday that it was unable to proceed with a $2 billion project to develop the country's giant South Pars gas field.

"The fines are in the multibillions these days so it's just not worth the risk for a small piece of business and maybe pleasing a (European) government". "With that in mind it's a logical decision", a European diplomat said of Total's decision.

In addition, about 14 million barrels of oil products were purchased from, or sold to, entities with ties to the Iranian government, generating 1.1 billion euros of revenue, and a net loss of 5.7 million euros, according to Total.

Iranian oil minister Bijan Zanganeh said the French firm would not pay a penalty if it pulled out of the project.

SP11 is the biggest proposed project between an global oil company and Iran and if Total withdraws, it will likely deal a significant blow to Tehran.

The Chinese major is reportedly ready to take operatorship off Total's hands if the French company formalizes its withdrawal.

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