France - gas - Iran - oil

Total to freeze investment in Iran, says Margerie

Thursday 10 July 2008

Christophe de Margerie, the chief executive of French energy giant Total, said Iran is currently too politically risky to invest in. His comments cast doubts on Total's participation in a major gas project in the country.

Thursday 10 July 2008

By Marie Valla (text)

Total CEO Christophe de Margerie was interviewed by Ulysse Gosset for FRANCE 24's "Talk of Paris" airing Friday, July 11th at 7:10 pm (GMT+2).

Total has decided to temporarily freeze plans to further invest in Iran due to the growing political instability between Iran and the international community, Total CEO Christophe de Margerie said on FRANCE 24’s Talk de Paris, being broadcast on Friday.

“Total is not withdrawing from Iran, but it won’t go ahead with the South Pars project,” Margerie told FRANCE 24.

Total has been negotiating with Iran over the development of Phase 11 of South Pars, a multi-billion dollar project to liquefy natural gas for export.

But, “Iran is politically too risky,” Margerie warned. Tensions between Iran and the international community have been escalating this week, culminating Thursday with Iran firing a second round of missile test.

"It is probably necessary that things get better, that Iran can again have better relations with its neighbours " he said.

Despite Total’s assurances that it wants to maintain long-term relations with the Islamic Republic, “Iran got upset,” at the decision, Margerie added.

Tehran said it was prepared to develop the South Pars gas field without the help of Total, according to Reuters.

‘Not giving in to government pressure’

Margerie denied that Total was giving in to pressure from the US or France. “The French government shared its convictions and desires with us,” Margerie said. “But it’s up to Total to decide what to do about it.”

European oil companies like Total have so far ignored their governments’ call to suspend trade with Iran to protest its non-compliance to IAEA requests for information on its nuclear programme. Unlike their European competitors, US firms acting in the energy sector are barred from doing business with Iran.

Total currently produces about 15,000 barrels of oil per day in Iran. Although Iran has the world's second biggest gas reserves after Russia, it has already run short on supply for its own domestic market in the past, forcing the country to suspend exports.

High energy prices

Asked about the relentless rise in energy prices, Margerie warned that there was little to expect in the coming months. “Oil isn’t a rare resource, but it’s one that’s going to become scarcer,” he said. “In the long term, prices can only go up.”

Consumers need to get used to high energy prices, he added, saying it wasn’t so much the prices themselves but the speed at which they went up that hurt.

“When you go up to $200 [a barrel] in two or three days, it’s a catastrophe,” Total’s chief said. “But when you go up to $200 over 10 or 15 years, it’s more than normal.”

But he brushed off the possibility that the barrel of crude may reach $200 before the end of the year. “To me it’s unlikely,” he said.