Breaking News
0

Total Stops Iran Gas Project as Risk From Sanctions Too High

EconomyMay 16, 2018 21:08
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters. Total Stops Iran Gas Project as Risk From Sanctions Too High

(Bloomberg) -- Total SA (PA:TOTF) said it will not risk investing in Iran following the return of U.S. sanctions, unless it can secure a waiver.

Continuing to do business in Iran would be too great a risk as the company has large operations in the U.S. and depends on the country’s banks for financing its operations, Total said in a statement Wednesday. So the French energy giant won’t commit any more funds to Iran’s South Pars 11 project, in which it took a controlling stake last year.

The comments from Total -- the first Western oil company to sign binding agreements to develop Iran’s oil and gas fields following the end of a previous round of sanctions in 2015 -- illustrate the challenge posed by renewed U.S. restrictions. While the French company was speaking about a natural gas project, its reluctance to continue operating there could equally apply to others that rushed back into sectors from automobiles to aviation and engineering to the oil trade.

“The risks of being on the wrong side of the U.S. government are not worth the benefits of trading with Iran once the sanctions are in place,” said Jason Gammel, a London-based analyst at Jefferies LLC. “Oil companies are not going to be able to invest in the upstream sector, traders and purchasers of Iranian crude are going to have to find other sources, or seek an exemption from the U.S. government to be able to continue buying.”

180 days

U.S. President Donald Trump said last week he intends to pull out of an international accord curbing Iran’s nuclear program. The U.S. Treasury has given companies up to 180 days to end dealings with Iran. The European Union, also a signatory to the atomic deal, has pledged to take steps to salvage the accord.

Total said it “is engaging with the French and U.S. authorities to examine the possibility of a project waiver.”

U.S. banks are involved in more than 90 percent of Total’s financing operations, American shareholders represent upward of 30 percent of its investors and the company has more than $10 billion of capital employed in the country, it said.

“The issue is that Iranian transactions can’t be processed though any part of the banking system that needs access to the U.S. dollar,” Gammel said. “There will be niche players who will far more benefit from trading with Iran than risk from the U.S. system, but it’s going to be a very small set of players that are not going to be particularly well capitalized.”

Losing Stake

Pulling out of the South Pars project could result in Total losing its stake to China National Petroleum Corp., National Iranian Oil Co. Managing Director Ali Kardor said this month. The French company said it has spent less than 40 million euros ($47 million) on the project so far.

Withdrawing from the South Pars 11 project will also not affect Total’s target to raise the company’s production by 5 percent a year between 2016 and 2022, according to the statement. It had planned to spend the equivalent of $1 billion on the first part of the development, and had projected an output of 370,000 barrels of oil equivalent a day from the Iran fields, making it the largest on its list of a dozen projects to be given the green light in the two years to 2018.

Total also bought about 56 million barrels of Iranian crude for nearly 2.6 billion euros last year, primarily for its own refineries, according to its annual report. 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.

The company didn’t say if these trades will be affected.

(Updates with analyst comment from fourth paragraph.)

Total Stops Iran Gas Project as Risk From Sanctions Too High
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email