The agreement with the French oil giant could be a harbinger for the return of more Western companies to Iran’s vast petroleum industry and represents a step forward for the Islamic Republic’s goals of ramping up production of oil and gas over the next several years.
European oil companies have been slow to return to Iran since the Persian Gulf country secured an end to sanctions on its energy industry by agreeing to curbs on its national nuclear program in January. American sanctions related to terrorism and weapons remain in effect on Iran.
The deal is a draft that still must be completed over the next six months, the official said, but it gives Total and CNPC a head start over competitors.
Representatives for CNPC and Petropars didn’t immediately respond to requests for comment. Total said representatives weren’t available to comment on Monday.
The agreement marks the first time a Western oil company has been contracted under the new terms for foreign firms working in Iran. The terms still haven’t been publicly released, but Iranian oil officials have said they foresee allowing oil companies to make more money and work for longer than previous deals that were seen as onerous and loss-making.
Total was long one of the most active Western oil companies in Iran, and its executives have said they were eager to return to a country with the fourth-largest reserves of oil in the world. Total kept an office open in Iran throughout sanctions and was the first European oil company to buy Iranian oil and ship it to Europe after the restrictions were lifted.
But actually setting up shop in Iran and drilling has been a riskier proposition. Total Chief Executive Patrick Pouyanne has said he was in no rush to return to Iran until the terms of working there were better understood.
Total and CNPC both signed deals years ago to develop the South Pars project before sanctions forced them to pull out. The South Pars field, which is shared by Iran and Qatar in the Gulf, contains 14,000 billion cubic meters of gas—8% of the world’s known reserves.
Total and CNPC have been leaders among oil companies in finding ways to do business in countries under U.S. sanctions. Both companies were key players in developing a $27 billion natural-gas field in Russia with a company, OAO Novatak, hit by sanctions, a deal largely financed by Chinese banks.