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France’s Total Says Time Isn’t Right to Invest in Iran

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France’s Total Says Time Isn’t Right to Invest in Iran

Associated Press
July 10, 2008 5:32 p.m.

PARIS — French energy giant Total SA said Thursday political conditions were not right for investing in Iran, dealing a serious blow to Tehran’s efforts to develop its natural gas reserves.

“The conditions are not present for investing in Iran today,” said Total spokeswoman Lisa Wiler. “We hope that the political relations will improve so that we can invest.”

Total has been in discussions for developing a liquid natural gas project linked to Iran’s South Pars gas field with Malaysia’s Petronas since 2006. Total did not say outright that it was abandoning the South Pars project forever, but the indication that it was suspending investment was a major blow given an earlier step-back by two other Western oil majors.

Total and oil majors have been under political pressure from the U.S. and its allies over their activities in Iran amid mounting tensions over Iran’s nuclear program. The U.S. and other countries fear the program is aimed at building weapons, but Tehran insists it is for producing nuclear energy.

The standoff heightened Wednesday when Iran test-fired missiles to show it could retaliate against a U.S. or Israeli attack. (See related article.)

The project is Total’s only significant development in Iran, and its suspension is likely to set back Iran’s ambitions to develop its liquid natural gas industry by eight to 10 years, said Samuel Ciszuk, a Middle East energy analyst at research firm Global Insight.

“This is a very hard blow” to Iran’s plan, especially given the decision in May by Royal Dutch Shell PLC and Repsol YPF SA to pull out of their own South Pars LNG development, Mr. Ciszuk said.

Iran needs Western technology to liquefy gas from the field so it can be shipped and sold abroad.

France’s government last year urged Total and national gas giant Gaz de France to refrain from investing in Iran.

“Today we would be taking too much political risk to invest in Iran because people will say, ‘Total will do anything for money,'” Chief Executive Christophe de Margerie was quoted by the Financial Times as saying Thursday.

Neither the company spokeswoman nor the CEO would say whether Total was pulling out of South Pars for good or from overall investment in Iran.

“Iran remains a priority country in the strategy of Total,” Ms. Wiler said. “We are still in contact” with Iranian partners, she said.

Russian and Chinese oil firms have been keen to expand their cooperation with Iran, but are unlikely to be able to replace Western oil majors as partners in LNG projects because they lack the necessary experience and advanced technology, Mr. Ciszuk said.

Iran’s giant South Pars gas field project is expected to produce 751 million cubic meters of natural gas a day when completed by 2014.

LNG is supercooled liquefied gas that is shipped from far-flung countries — Iran, Qatar, Russia and Indonesia are major suppliers — to coastline terminals, where it is heated, vaporized and fed into a pipeline. Liquid gas is compact enough to move by ship instead of pipeline, increasing the number of potential customers.

Repsol has not yet decided whether it will leave Iran, spokesman Kristian Rix said. “It’s true that Repsol has sought to leave the South Pars field, but it doesn’t mean we’re leaving Iran. We’re just not 100% sure that we’ll stay,” Mr. Rix said.

Royal Dutch Shell also is interested in finding a new project in Iran to replace Phase 13 of South Pars, which the company decided to pull out of in May, spokeswoman Eurwen Thomas said.

Mr. de Margerie expressed frustration at U.S. pressure on European energy investors in the countries. “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,” he was quoted as saying.

Copyright © 2008 Associated Press

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