Total has two months to seek US sanctions exemption, Iran oil minister says

Total said on May 16 that it would pull out of South Pars if it did not receive a waiver from the United States. (Reuters)
Updated 30 May 2018
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Total has two months to seek US sanctions exemption, Iran oil minister says

  • Iran's oil minister gives Total 60 days to win a sanctions waiver from Washington or it would lose its stake in a multi-billion-dollar gas project
  • Total was the only western firm to finalise an investment deal in Iran's energy sector following the 2015 nuclear deal

LONDON: French oil major Total has two months to seek exemption from US sanctions after Washington’s withdrawal from the international nuclear deal, Iran’s oil minister told state news agency SHANA on Wednesday.
The minister, Bijan Zanganeh, added that failure to secure an exemption would mean that China’s state-owned CNPC could take over Total’s stake in the South Pars gas project, lifting its own interest from 30 percent to more than 80 percent.
The United States this month said it would impose new sanctions against oil and gas producer Iran after abandoning the 2015 agreement that limited Tehran’s nuclear ambitions in exchange for sanctions relief.
“Total has 60 days to negotiate with the US government,” Zanganeh said, adding that the French government could also lobby Washington.
Total signed a contract in 2017 to develop phase 11 of the South Pars field with an initial investment of $1 billion — a contract Tehran repeatedly hailed as a symbol of the nuclear deal’s success.
A spokesman for Total told Reuters: “On May 16, we said that in accordance with our contractual commitments vis a vis the Iranian authorities, Total was engaging with the French and US authorities to examine the possibility of a project waiver.”
“It is the process and timing that was agreed upon in the SP 11 contract in case there would be sanctions. We activated the process planned in the contract,” he added.
He did not give any further details.
Total’s CEO Patrick Pouyanne said last week that the only way for the company to continue their project in Iran would be to have a special waiver, but added that “it’s quite unlikely.”
European powers still see the nuclear accord as the best chance of stopping Tehran from acquiring a nuclear weapon and have intensified efforts to save the pact.
Zanganeh also said on state television that an agreement with Europe would inspire other potential buyers of Iranian oil.
“Europe is buying only one third of Iranian oil, but an agreement with Europe is important to guarantee our sales, and find insurance for the ships ferrying the crude. Other buyers would also be inspired by this,” he said.
Lukoil Russia’s second-biggest oil producer, said on Tuesday that it had decided not to go ahead with plans to develop projects in Iran because of the threat of US sanctions.
Iran’s crude oil exports declined slightly in May, according to estimates from a leading tanker-tracking company, in the first sign that the threat of US sanctions may be deterring buyers.


Saudi energy minister recommends driving down oil inventories, says supply plentiful

Updated 25 sec ago
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Saudi energy minister recommends driving down oil inventories, says supply plentiful

  • Oil supplies were sufficient and stockpiles were still rising despite massive output drops from Iran and Venezuela
  • Producer nations discussed how to stabilise a volatile oil market amid rising US-Iran tensions in the Gulf, which threaten to disrupt global supply

JEDDAH: Saudi Arabia’s Energy Minister Khalid Al-Falih said on Sunday he recommended “gently” driving oil inventories down at a time of plentiful global supplies and that OPEC would not make hasty decisions about output ahead of a June meeting.
“Overall, the market is in a delicate situation,” Falih told reporters before a ministerial panel meeting of top OPEC and non-OPEC oil producers, including Saudi Arabia and Russia.
While there is concern about supply disruptions, inventories are rising and the market should see a “comfortable supply situation in the weeks and months to come,” he said.
The Organization of the Petroleum Exporting Countries, of which Saudi Arabia is de facto leader, would have more data at its next meeting in late June to help it reach the best decision on output, Falih said.
“It is critical that we don’t make hasty decisions – given the conflicting data, the complexity involved, and the evolving situation,” he said, describing the outlook as “quite foggy” due in part to a trade dispute between the United States and China.
“But I want to assure you that our group has always done the right thing in the interests of both consumers and producers; and we will continue to do so,” he added.
OPEC, Russia and other non-OPEC producers, an alliance known as OPEC+, agreed to reduce output by 1.2 million barrels per day (bpd) from Jan. 1 for six months, a deal designed to stop inventories building up and weakening prices.
Russian Energy Minister Alexander Novak told reporters that different options were available for the output deal, including a rise in production in the second half of the year.
The energy minister of the United Arab Emirates, Suhail Al-Mazrouei, said oil producers were capable of filling any gap in the oil market and that relaxing supply cuts was not “the right decision.”
Mazrouei said the UAE did not want to see a rise in inventories that could lead to a price collapse and that OPEC would act wisely to maintain sustainable market balance.
“As UAE we see that the job is not done yet, there is still a period of time to look at the supply and demand and we don’t see any need to alter the agreement in the meantime,” he said.
US crude inventories rose unexpectedly last week to their highest since September 2017, while gasoline stockpiles decreased more than forecast, data from the government’s Energy Information Administration showed on Wednesday.
DELICATE BALANCE
Saudi Arabia sees no need to boost production quickly now, with oil at around $70 a barrel, as it fears a price crash and a build-up in inventories, OPEC sources said, adding that Russia wants to increase supply after June.
The United States, not a member of OPEC+ but a close ally of Riyadh, wants the group to boost output to bring oil prices down.
Falih has to find a delicate balance between keeping the oil market well supplied and prices high enough for Riyadh’s budget needs, while pleasing Moscow to ensure Russia remains in the OPEC+ pact, and being responsive to the concerns of the United States and the rest of OPEC+, the sources said earlier.
Sunday’s meeting of the ministerial panel, known as the JMMC, comes amid concerns of a tight market. Iran’s oil exports are likely to drop further in May and shipments from Venezuela could fall again in coming weeks due to US sanctions.
Oil contamination also forced Russia to halt flows along the Druzhba pipeline — a key conduit for crude into Eastern Europe and Germany — in April. The suspension, as yet of unclear duration, left refiners scrambling to find supplies.
Russia’s Novak told reporters that oil supplies to Poland via the pipeline would start on Monday.
OPEC’s agreed share of the cuts is 800,000 bpd, but its actual reduction is far larger due to the production losses in Iran and Venezuela. Both are under US sanctions and exempt from the voluntary reductions under the OPEC-led deal.
REGIONAL TENSIONS
Oil prices edged lower on Friday due to demand fears amid a standoff in Sino-US trade talks, but both benchmarks ended the week higher on rising concerns over disruptions in Middle East shipments due to US-Iran political tensions.
Tensions between Saudi Arabia and Iran are running high after last week’s attacks on two Saudi oil tankers off the UAE coast and another on Saudi oil facilities inside the Kingdom.
Riyadh accused Tehran of ordering the drone strikes on oil pumping stations, for which Yemen’s Iran-aligned Houthi militia claimed responsibility. 
Saudi Arabia’s minister of state for foreign affairs said on Sunday that the Kingdom wants to avert war in the region but stands ready to respond with “all strength” following the attacks.
“Although it has not affected our supplies, such acts of terrorism are deplorable,” Falih said. “They threaten uninterrupted supplies of energy to the world and put a global economy that is already facing headwinds at further risk.”
The attacks come as the United States and Iran spar over Washington’s tightening of sanctions aimed at cutting Iranian oil exports to zero, and an increased US military presence in the Gulf over perceived Iranian threats to US interests.