November 9, 2016 - 8:16 AM EST
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Blog Coverage French Energy Giant Total S.A. Teams up with Chinese CNPC to Develop Gas Production in Iran

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LONDON, UK / ACCESSWIRE / November 9, 2016 / Active Wall St. blog coverage looks at the headline from France based energy company Total S.A. (NYSE: TOT) as the company announced on November 08, 2016, that it had signed a Head of Agreement (HoA) with the National Iranian Oil Company (NIOC) for the development of phase 11 of South Pars field, which is based in Iran. The total value of the project is estimated to be worth over $4.8 billion. Register with us now for your free membership and blog access at:

One of Total's competitors within the Major Integrated Oil & Gas space, BP PLC (NYSE: BP), posted its third-quarter earnings on November 01, 2016. AWS will be initiating a research report on BP PLC in the coming days.

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Commenting on the development, Patrick Pouyanné, Chairman and CEO of Total said:

"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."

Details of the Agreement

Total will partner with Chinese company China National Petroleum Corporation (CNPC) and Iran's Petropars, a 100% subsidiary of NIOC, for the development of Phase 11 of the South Pars field. Total will have 50.1% interest, Petropars will have 19.9% interest, and the remaining balance of 30% interest in the project will be held by CNPC.

Under the signed terms of the HoA, the project partners will conduct exclusive negotiations with NIOC to finalize a contract for a 20-year period. The contract will not only fulfill the technical and economic conditions of the HoA, but also be within the framework of the Iranian Parliament approved Iranian Petroleum Contract (IPC). Simultaneously, Total will conduct engineering studies and initiate the tender process so that it can immediately award contracts and start the construction on the project, on finalization of the agreement. The contract must be finalized within six months.

The development of the SP11 project will be done in two phases. In the first phase construction of 30 wells and 2 wellhead platforms connected to existing onshore treatment facilities by 2 subsea pipelines will be undertaken. The estimated cost for the first phase is approximately $2 billion. In the second phase, the company will make investments for the construction of offshore compression facilities. The project has a production capacity of 1.8 billion cubic feet per day, or 370,000 barrels of oil equivalent. The entire gas production from this project will be used by Iran's gas network.

The final agreement is expected to be signed in the first quarter of 2017 and the production is expected to start within 40 months of signing the final agreement.

About South Pars Phase 11 (SP11)

The South Pars field, which is shared by Iran and Qatar in the Persian Gulf, and is known as the world's largest gas field. As per a rough estimate it contains 14,000 billion cubic meters of gas, i.e. approximately 8% of the world's known reserves. Phase 11 of the South Pars gas field has the capacity to produce two billion cubic feet of natural gas every day.

France-based Total had been in negotiation with Iran for the same project in 2000, which it had to abandon due to the US led sanctions in 2010. Incidentally, this would be the first deal that Iran has signed since the lifting of international sanctions in January 2016. Lifting of some of the international sanctions was due to the implementation of the nuclear deal, known as the Joint Comprehensive Plan of Action. Total plans to overcome the balance of the sanction hurdles on Iran by using its own cash reserves to fund the deal. Total would receive gas condensates from the Iranian government as payment, which it can then sell in the international markets.

Iran has been keen to attract foreign investments since the easing of sanctions and is looking at its oil and gas reserves as a medium to reach its goal.

Stock Performance

At the close of trading session on November 08, 2016, Total's stock price rose slightly by 0.23% to end the day at $47.52. A total volume of 1.23 million shares were exchanged during the session. The company's share price has gained 10.42% on YTD basis. The stock currently has a market cap of $119.91 billion. The company's shares are trading at a PE ratio of 29.70 and have a dividend yield of 5.74%.

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