With a 50.1 percent share, Total will invest an initial $1 billion in the South Pars offshore gas field as part of a consortium with Chinese and Iranian firms.

In this photo released by official website of the office of the Iranian Presidency, a part of the South Pars gas field facility is seen on the northern coast of Persian Gulf, Iran. April 16, 2017.
In this photo released by official website of the office of the Iranian Presidency, a part of the South Pars gas field facility is seen on the northern coast of Persian Gulf, Iran. April 16, 2017.

Iran on Monday signed a $5 billion agreement with French energy giant Total SA and a Chinese oil company to develop its massive South Pars gas field. Iran shares the field with Qatar, which refers to the prime real estate as the North Dome.

It is by far the biggest vote of confidence in the Islamic Republic since sanctions were lifted under a 2015 nuclear deal with world powers. The 20-year project that defies the US pressure will eventually see the firms inject $4.9 billion.

"This is a major agreement for Total, which officially marks our return to Iran to open a new page in the history of our partnership with the country," Total chairman and CEO Patrick Pouyanne said in a statement.

Total has a 50.1 percent share in the deal and will invest an initial $1 billion (880 million euros) in the South Pars offshore gas field as part of a consortium with Chinese and Iranian firms.

The state-owned China National Petroleum Corp. has 30 percent stake and Iran's Petropars has 19.9 percent.

The development at phase 11 of the South Pars field will see 20 wells and two wellhead platforms built and connected to existing facilities by two underwater pipelines, Total said.

A second phase will involve the construction of offshore compression facilities, the firm said.

Total said the project will have a capacity of 2 billion cubic feet of natural gas a day or 400,000 barrels of oil equivalent per day, including condensate.

Pouyanne on Monday said "Total has a long history in Iran," pointing to its development of phases two and three of South Pars in the 1990s.

The aim is to start pumping into Iran's domestic grid in 2021, eventually reaching 50.9 million cubic metres (1.8 billion cubic feet) of gas per day.

Iranian officials said the products would be worth a total of $54 billion at current prices.

Total had signed up to develop phase 11 back in 2009 but was forced to abandon its Iranian projects in 2012 when France joined EU partners and imposed sanctions, including an oil embargo.

Iran's O&G; goals and the US

Oil Minister Bijan Namadar Zanganeh said the deal was a direct result of moderate President Hassan Rouhani's resounding re-election victory in May and strong public support for rebuilding ties with the West.

"The people said firmly that our oil policies should continue," he said. "We shall never forget Total being the forerunner." He said his country needs some $200 billion of investments in its oil industry in the next five years to make up for time lost during sanctions.

Iran hopes to produce six million barrels of crude oil and condensates a day in five years, he said, up from some 3.6 million today.

"We do not consider any obstacle for the participation of American companies," Zanganeh said.

"The main obstacle is being created by the US government."

Total has appointed a compliance officer with the sole task of ensuring it does not fall foul of US measures against Iran. In particular, it must prevent cash flowing to Iran's elite Revolutionary Guards – a tall order given their extensive and shadowy presence across the Iranian economy.

Just a fortnight ago, the US Senate overwhelmingly passed a bill targeting the Guards over their involvement in regional conflicts and the country's ballistic missile programme.

The White House is also in the midst of a 90-day review on whether to abandon the nuclear deal entirely, which President Donald Trump threatened to do during his election campaign.

Foreign Minister Mohammad Javad Zarif was warmly received by EU leaders last month and tweeted that they were committed to the nuclear deal "despite reckless US hostility".

The uncertainty has been enough to deter global firms such as BP from dipping their toes in Iranian waters, while Shell and Russia's Gazprom have signed only preliminary deals to date.

Foreign firms in Iran still face "pervasive corruption... high levels of red tape; potential for currency instability (and) reluctance to allow foreign involvement within the domestic economy," consultancy firm BMI Research wrote in a briefing note Monday.

But Iran's large population of middle-class consumers presents an irresistible opportunity for many businesses in Europe and beyond.

Iran sits atop the world's fourth-largest oil reserves and the second-biggest stores of natural gas.

Source: AFP