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Iran agrees to first upstream deal after US sanctions

Tehran — Iran has agreed to sign a $1.167 billion upstream deal with the UK-led Pergas consortium Wednesday for the development of the onshore Karanj oil field, only a week after the US withdrew from the nuclear deal.

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Iranian oil minister Bijan Zanganeh, present at the signing of the heads of agreement between the Pergas consortium and National Iranian South Oil Co., remained confident the group will go through with the deal despite the re-imposition of US sanctions, which are expected to affect Europe-based companies.

"I meticulously made sure by questioning Pergas to see where they bring finance or equipment from," Zanganeh said. "I wanted to be sure it is not just a signature. I am not worried for now because they told me where they will provide their resources. As they said they will sign the contract within two months."

The Karanj Field, located in Khuzestan province, now produces 127,000 b/d, according to the ministry. Production is expected to gradually reach 200,000 b/d and over a 10-year period, total output would reach 655 million barrels, it said. The field holds 11 billion barrels in place, the ministry said.

The Pergas consortium submitted the result of its studies on the field in October 2017. The move followed a memorandum of understanding signed by Pergas in November 2016 to study Karanj and the Shadegan oil field. It is not clear what Pergas would do regarding Shadegan.

The Pergas consortium is comprised of 11 companies, including Norway's AGR, UAE-based SPEC, Dubai-based Oilserv, UK's Looby, the Philippines' PNOC, the UK's Standard Handson and Iran's Sanati Sharif University.

Iranian companies Mapna and Pasargad Energy had also signed agreements with NISOC to study Karanj.

Zanganeh sounded a defiant yet pragmatic tone Wednesday, saying that he was confident that after the exit of US from the nuclear agreement the other countries would stand firm.

"We expect the 5+1 group to make up for the US move to break the deal," he said. "We expect them to give us adequate assurance to us for this significant sector that their mid- and small-size companies can work with us. The major ones could possibly face problems. We know. But we must go on. They can possibly slow us down but can't stop us."

The signing of the final contract is expected to happen in two months from now, and the consortium will start work in a matter of two to three months.

Earlier Wednesday, France's Total halted plans to help develop Iran's giant South Pars gas field as it seeks to clarify whether the investment can avoid falling foul of the returning US sanctions on Tehran.

Previous sanctions from the US and the West had hit Iran's oil sales and upstream development.

In 2011-15, when the EU and US previously levied sanctions on the transportation and purchase of Iranian crude, Iran saw its exports fall by almost 1 million b/d. It doubled its oil exports to about 2.2 million-2.4 million b/d since the nuclear deal was implemented in January 2016.

Iran currently producing about 3.82 million b/d of oil, according to S&P Global Platts estimates.

--Aresu Eqbali with Eklavya Gupte,

--Edited by Richard Rubin,