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French oil major Total expected to sign a deal with Iran and CNPC, priming the pump for $200 billion in post-sanctions IPCs

Iran quickly ramped its oil production up following the end of international sanctions on the country, but now that the Islamic Republic’s output is up above 3.5 MMBOPD, it will likely need the help of international companies to reach its goal of 12.7% of OPEC’s total output – 4.2 MMBOPD. The first Western company to eye doing a deal with Iran since the end of sanctions is French oil major Total (ticker: TOT), which is expected to sign a $6 billion deal to help develop an offshore gas field.

Total, China National Petroleum Corp. (CNPC) and Iran’s state-owned Petropars will develop part of the South Pars field, which holds 40% of Iran’s natural gas reserves, which are the second-largest of any country in the world after Russia. It is unclear how much of the $6 billion project price tag will come from Total, or how the French company plans to avoid running afoul of American sanctions against Iran, which are still in effect over alleged human rights abuse, reports The Wall Street Journal.

Largest proved reserves of natural gas at the end of 2014 according to the EIA

A report from France’s AFP indicated that Total will head the consortium. The deal must be finalized within six months, according to a spokesman.

International oil companies left Iran starting in 2008 as the international community began to implement more sanctions on the country over its nuclear program. Now, Iran is looking to attract some $200 billion in foreign investment using a new contract model called the Iranian Petroleum Contract (IPC).

The IPCs have been a major factor in the decision making process for international companies as they look to see how the new model will work. With elections quickly approaching in Iran, some market watchers are concerned that the contracts may see changes if President Hassan Rouhani loses reelection.

Total’s reentry into Iran could help push some others from the sideline. A spokesperson from Royal Dutch Shell (ticker: RDSA) confirmed to CNBC that the company is considering areas of cooperation with Iran’s National Petrochemical Company, but that “it is much too early to discuss potential Shell investment in any project.” Similarly, a spokesperson from Italian oil major Eni (ticker: E) said the company is in wait-and-see mode.

“Basically, Iran has a great potential in terms of oil and gas reserves. However, we are still trying to understand the contractual frameworks that will be adopted for the oil and gas industry in the country. In view of that, we will evaluate any possible opportunity,” the Eni spokesperson said.

American companies are still unable to pursue any sort of cooperation with Iran or Iranian individuals due to U.S. sanctions against Tehran.

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