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Total steps back from investing in Iran

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Total steps back from investing in Iran

By Carola Hoyos in London and Daniel Dombey in Washington

Published: July 9 2008 23:34 | Last updated: July 9 2008 23:34

Iran has lost the last major western energy group that had been considering making a significant investment to develop the country’s huge gas reserves in a victory for Washington’s efforts to isolate Tehran over its nuclear ambitions.

Total, the French energy group, told the FT it was now too risky to invest in Iran, making it highly unlikely that the group will invest in a liquefied natural gas project linked to Iran’s South Pars gas field in near future.

The comments from Christophe de Margerie, chief executive, follow weeks of increasing tensions between Iran and Israel. On Wednesday, Tehran test-fired nine missiles and warned that it would provide massive retaliation to any military strike.

The US has also stepped up its push to impose tougher sanctions on Tehran in the dispute over Iran’s nuclear programme.

Mr de Margerie said: “Today we would be taking too much political risk to invest in Iran because people will say: ‘Total will do anything for money’.”

Together with Malaysia’s Petronas, Total was due to develop phase 11 of the South Pars field and had until Wednesday maintained it had not decided to drop its interest in the project. After May’s announcement that Royal Dutch Shell andRepsol YPF of Spain would pull out of Phase 13, Total was left exposed.

Total’s move is a big blow for Iran, which is now unlikely to be able to significantly raise its gas exports until late in the next decade at the soonest. Samuel Ciszuk, Middle East energy analyst at Global Insight, called Total’s decision “a death blow” for Iran’s LNG ambitions, because the country would now be unable to gain the knowhow it needed for such complex projects, even if it teamed up with Russia or China.

None of the western oil companies including Total is willing definitively to close the door on Iran’s massive hydrocarbon reserves. Shell and Repsol said they could still join later stages of the development of the field.

In a further sign of the increased scrutiny over investments in Iran’s energy sector, William Burns, the US state department’s top official on Iran, told a US congressional committee on Wednesday that Washington would conduct a “serious review” to see whether the Norwegian group StatoilHydro had violated US law by carrying out a large investment in Iran.

Washington had been particularly worried about Total, and US officials concede measures affecting the transfer of western investment and knowhow to Iran’s energy sector have a much greater impact than do financial sanctions. But Mr de Margerie voiced his anger at the policy, saying: “You take two major countries [Iran and Iraq] out of the system and then you say: ‘There is not enough oil and gas.’ Oh no, surprise, surprise.”

Wednesday’s test firing left the oil market unfazed, with oil prices failing to make up recent losses and trading at $136.20 a barrel.

EDITOR’S CHOICE

In depth: Iran – Nov-04

Fear over Israel’s threat to strike Iran – Jul-02

Copyright The Financial Times Limited 2008

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