Total will go ahead with development of a giant Iranian gas field this summer, its CEO told Reuters, in the first major western energy investment in the country since Tehran signed an international nuclear deal.
Chief Executive Patrick Pouyanne said the French group would make an initial $1 billion investment after the United States extended sanctions relief for Iran under the 2015 agreement.
"It is worth taking the risk at $1 billion because it opens a huge market. We are perfectly conscious of some risks. We have taken into account (sanctions) snap-backs, we have to take into account regulation changes," Pouyanne said in an interview.
"The U.S. waivers have been renewed and they will be renewed every six to eight months. We have to live with some uncertainty," said Pouyanne.
Total holds a 50.1 interest in the South Pars project along with state-owned China National Petroleum Corporation, with 30 percent, and Iran's Petropars with a 19.9 percent, he said.
The new Iranian Petroleum Contract (IPC) differs from its predecessor by offering the operator remuneration based on production rather than a simple percentage of the development costs, Pouyanne said.
It also extends over a period of 20 years rather than seven or eight. "The IPC is a real improvement," he said. "We will not go to Iran if there is not a reward which is commensurate."
Gas from South Pars will supply only the fast-growing domestic Iranian market and none will be exported, Pouyanne said. Total will be paid not in cash but in condensate, a very light crude oil which is a by-product of gas production.
Total is also considering a petrochemicals project in Iran which would require external financing from Asian banks, although this remains in less advanced stage, Pouyanne said.