PARIS (Reuters) - U.S. President Donald Trump’s decision on Tuesday to pull out of the Iran nuclear accord and reinstate tough economic sanctions could scupper French oil major Total’s (TOTF.PA) multibillion-dollar gas project in the country unless it can secure a waiver.
Total signed a deal with Tehran in July 2017 to develop phase 11 of Iran’s South Pars field with an initial investment of $1 billion, marking the first major Western energy investment in the Islamic Republic since the lifting of sanctions.
However, Trump described the nuclear agreement that made such an investment possible as “horribly one-sided” and said Iran had used proceeds from the lifting of sanctions in 2015 to “build nuclear-capable missiles, support terrorism and cause havoc across the Middle East and beyond”.
He said he would be instituting the highest level of economic sanctions against Tehran, raising questions over the viability of investments made in Iran by foreign companies with a U.S. footprint.
“Any nation that helps Iran for their quest for nuclear weapons could also be strongly sanctioned by the United States,” Trump said.
Total buys Iranian crude for its European refineries, carries out transactions in U.S. dollars and billions of dollars in U.S. investments including its Port Arthur refinery.
Company officials were not immediately available for comment.
Total expects the South Pars 11 project, part of the world’s largest gas field, to have production capacity of 2 billion cubic feet per day, or 400,000 barrels of oil equivalent per day including condensate, to supply the Iranian domestic market from 2021.
Chief Executive Patrick Pouyanne has previously said that one option open to the company if Trump withdrew from the Iran accord and imposed new sanctions would be to seek a waiver allowing it to continue working in Iran.
“If the sanctions are back, we will have to apply for specific sanctions waivers,” Pouyanne told journalists on the sidelines of a conference on April 19.
Total has history of success in such moves. In the 1990s it obtained a waiver for the South Pars 2 and 3 projects after the imposition of U.S. sanctions at the time.
It argued then, as it might do now, that it made its investment at a time sanctions were not in place.
Pouyanne said that Total has been lobbying the French government and other European capitals to obtain such a waiver again and protect its investments in Iran.
Total has a 50.1 percent stake in the $5 billion South Pars 11 project. Terms of the partnership show it is committed to investing an initial $1 billion to get the project off the ground and a further billion to develop the project.
Sources say it has already spent several tens of millions of dollars on studies and tenders.
China’s CNPC has a 30 percent stake in the project, while the Iran’s national oil company’s subsidiary PetroPars holds the remaining 19.9 percent.
If Total were to fail in an eventual attempt to obtain a waiver, the company is expected to take a backseat and allow CNPC to become lead operator, according to people with knowledge of the deal.
Total has previously expressed its commitment to Iran and desire to press ahead with the project as long as it can find a way to continue operating legally in the country.
Reporting by Bate Felix; Editing by Richard Lough; Editing by David Goodman