Iran set to sign breakthrough gas deal with France’s Total and CNPC of China

France’s Total and China National Petroleum Corp are set to sign the first big agreement with Iran for development of its gasfields since the loosening of international sanctions in January.

Iran’s oil ministry said it expected to finalise the preliminary deal, involving development of the South Pars gasfield, today. It would be a breakthrough in Tehran’s efforts to attract renewed investment in its outdated energy infrastructure and unlock some of the world’s biggest oil and gas reserves.

For Total, the deal would open the way for its return to Iran six years after the French oil major left the country amid tension over Tehran’s nuclear arms project. It would highlight Total’s hunt for sources of growth in spite of persistent weakness in the oil market.

In an interview with the Financial Times, Patrick Pouyanné, chief executive, highlighted Iran among the places he was interested in investing. He said new oil and gas projects were urgently needed to stave off supply shortages after the sharp downturn in industry capital expenditure since oil prices fell in mid-2014.

“The number of new projects being sanctioned is by far not sufficient to fight against declines [in reserves],” he said. “In commodities you must invest when the prices are low and the costs are low.” He later said the deal, worth about $2bn, could be signed in days.

Mr Pouyanné said there was “huge potential” in Iran, which has the world’s second-largest gas reserves and fourth-largest oil reserves, according to the US Energy Information Administration. Iran wants $200bn of investment in energy over the next five years. Until now it has struggled to persuade overseas energy companies to commit amid wrangling over contract terms.

Under the deal expected to be signed with state-controlled National Iranian Oil Company, Total will form a consortium with CNPC and Petropars of Iran to develop a new phase of South Pars.

Total had long been seen as one of the companies most likely to seek renewed access to Iran after nuclear-related sanctions were eased because it helped develop South Pars together with Statoil of Norway in the late 1990s and early 2000s. South Pars holds 51tn cubic metres of gas, according to the International Energy Agency.