April 21, 2017
France’s Total is in talks to buy a multi-billion-dollar stake in Iran’s partly built liquefied natural gas (LNG) export facility, called Iran LNG, Reuters reported.
The French oil major seeks entry into Iran LNG at a discount to the pre-sanctions price in exchange for reviving the stalled project, two sources said. A third source confirmed Total was in the running for a stake, but said any deal was still a long way off.
The call for a discount is bound to send hardliners in orbit. They see all foreigners—and especially all Western oil firms—as dedicated to ripping Iran off.
Iran LNG was one of three LNG projects Iran had going before sanctions struck hard. The other two projects were mothballed. Iran said it would keep working on Iran LNG on its own, but that proved impossible since Iran could not get the required technology.
Iran can sell gas to neighbors through pipelines. But sales to distant shores require that the gas first be liquefied—cooled to minus-162 degrees Celsius (-260 Fahrenheit) —and then shipped by tanker. In other words, to be a major gas exporter, Iran needs to be able to liquefy gas.
Iran shares the world’s biggest gasfield with Qatar, which has used the reserves to build over a dozen giant liquefaction plants—a move Iran is keen to replicate.
Iran aims to grow gas output to 1 trillion cubic meters by 2018, up from 160.5 billion cubic meters in 2012, before the latest sanctions took effect. That goal cannot be met in such a short time.
Total proposes to commit $2 billion to develop the 11th phase of the South Pars field this summer—supplies that could be used to feed Iran LNG.
Work on Iran LNG hit a wall in 2012 when sanctions stopped Iran from bringing in liquefaction technology from German contractor Linde. The Munich-headquartered firm declined to say when it would ship those parts to Iran. At issue are reimbursements demanded by Linde for the cost of storing Iran LNG’s liquefaction train, or production line, during the sanction years, industry sources said.
Equipment was finished for the first production train and about half-finished for the second one, an Iranian gas industry source told Reuters.
With $2.3 billion invested so far, Iran LNG is more than half-built with two storage tanks, a jetty and power plant, sources said. But total costs to bring the plant on-stream may be as high as $10 billion.
The National Iranian Gas Export Co. (NIGEC), which owns 49 percent of the joint venture, and the Oil Pension Fund, which holds the rest, have expressed a willingness to sell down their stakes to attract a Western partner.
