OREANDA-NEWS. November 09, 2016.  Iran has agreed a provisional development deal with overseas companies for phase 11 of the giant South Pars gas field, the first major energy agreement signed since the lifting of EU and US nuclear sanctions.

Gas output from South Pars 11 was originally earmarked for a long-delayed Iran LNG export facility, and this agreement could signal a revival in the liquefaction project.

Total will take a 50.1pc operating stake in the project, with Chinese state-owned oil firm CNPC and state-owned NIOC subsidiary Petropars taking 30pc and 19.9pc respectively. The three companies signed a provisional agreement with NIOC today and will now negotiate terms of a 20-year contract for the 1.8bn ft?/d (18.5bn m?/yr) project under the terms of the country's newly approved upstream investment contract model, the Iran Petroleum Contract (IPC).

"This project is in line with our strategy," Total Middle East and north Africa president Stephane Michel said. "First, to reinforce our presence in the Middle East... and second, to complement our portfolio with a gas asset and a low technical cost asset."

The 10.8mn t/yr Iran LNG joint-venture project is one of three LNG export projects Iran was planning to launch before sanctions were stepped up around 10 years ago and delayed the process. Iran is expected to start LNG exports by 2020, following the lifting of sanctions.

South Pars 11 will be developed in two phases. The first will consist of 30 wells and two wellhead platforms connected to existing onshore treatment facilities by two subsea pipelines at a cost of around \\$2bn. A later investment phase will involve construction of offshore compression facilities.

For Iran the deal is the first reward from a push to encourage billions of dollars of much-needed investment. This was set back by wrangling over the terms of the IPC, which was approved by parliament and the cabinet after some delay in September. Iran has 50 upstream development projects on offer under the new terms. Tehran aims to prioritise development of border fields that share oil or gas reservoirs with neighbours that have been able to exploit them more fully while nuclear-related sanctions constrained investment in Iran. South Pars shares a reservoir with Qatar, encouraging NIOC to prioritise its development.

"We are fully committed to launch as soon as possible the engineering studies [and] the call for tender process that are necessary for the development, so that we can put South Pars phase 11 on stream really quickly," Michel said. We hope "to finalise the IPC contract in the coming months", he said.

Total is a stakeholder in other LNG projects in the Middle East including in Yemen and Qatar. Total and CNPC are stakeholders in Russia's 16.5mn t/yr Yamal LNG project.