Wednesday, 26 July, 2017

Why Total’s gas deal with Iran is so important for the country’s future

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By Meysam Tayebipour, Epoch Times

Nine years ago, when sanctions were imposed on Iran by the international community, Total was the last Western energy company to suspend its activity there. Now, following the lifting of nuclear sanctions on Iran in January 2016, Total is the first Western company to return to the Iranian energy market. On July 3, the French company announced that it had signed a contract with Iran to develop and produce gas from phase 11 of South Pars (SP11) – the world’s largest gas field.

This is significant not just for Total and the Iranian economy, it also gives an important boost for the 2015 nuclear deal which has been the subject of debate in the US, as well as within Iran, in which the benefits of the deal have been questioned.

The deal is important for Iran for several reasons. Iran is the largest gas reserve holder globally. But, due to the lack of infrastructure and investment, it has struggled to extract enough energy from its gas fields even for its own consumption. Hence, Iran has long been a net importer of gas, largely from Turkmenistan. To produce more gas for its own market, Iran needs international oil companies to invest in its energy industry.

Data shows that in the past year, there has been a dramatic increase in Iran’s natural gas consumption. Last year, around 1.6 billion cubic feet of natural gas was consumed a day in Iran, and this is set to rise. The investment will produce 2 billion cubic feet per day for Iran’s domestic markets by 2021.

Domestic growth

Iran will also be hoping that this deal sets the ball rolling for more international engagement. After years of isolation and sanctions that have crippled its economy, Iran wants to enter the international market. Hassan Rouhani, who was recently re-elected as president, is a pragmatic politician and is constantly announcing that Iran is looking to open up to the rest of the world.

Rohuani, who made the nuclear deal with the West, now wants to encourage foreign investment to return to Iran. The deal with Total will provide an incentive for other foreign companies to sign deals with Iran. Oil companies such as Dutch Shell and Italy’s Eni have already started to negotiate with Iran for new contracts. The Total deal shows it is possible.

Plus, it strengthens Rouhani’s position as a political reformer. His more hardline opponents have criticised the nuclear deal for failing to help the country’s economy and halting its nuclear programme. The deal was signed in 2015 and since then Iran’s economy, despite the lifting of sanctions, is making a slow recovery. The Total deal gives Rouhani a concrete example of much-needed investment returning, thanks to the lifting of sanctions.

Photo: Total’s chief executive, Patrick Pouyanné, signs a deal with Iranian officials. EPA

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