Page last updated at 16:14 GMT, Thursday, 10 July 2008 17:14 UK

French firm quits Iran gas deal

Christophe de Margerie, file image
Total was reportedly the last major western energy firm interested in Iran

The head of French energy giant Total has said it will not invest in Iran because it is too politically risky.

The company had been planning to develop the huge South Pars gas field, but Christophe de Margerie says this will not now go ahead.

The announcement comes a day after Iran test-fired a series of missiles amid weeks of rising tensions with Israel and the US over its nuclear ambitions.

Analysts say Total's move will be a big blow to the Iranian energy industry.

It means Iran is now unlikely to significantly increase its gas exports until late into the next decade, they add.

In further response to the test missiles, US Secretary of State Condoleezza Rice said on Thursday that Washington would defend the interests of America and those of its allies from attacks by Iran.

Sanctions

Total has a memorandum of understanding with the state-owned National Iranian Oil Company to develop Phase 11 of Iran's half of the South Pars field in the Gulf.

Today we would be taking too much political risk to invest in Iran because people will say: 'Total will do anything for money'
Christophe de Margerie
Chief Executive, Total

In May, Total said it was still interested in working on the project together with the Malaysian company, Petronas.

But Mr de Margerie's comments now cast serious doubt on whether the French firm will invest in the Islamic Republic in the near future.

"Today we would be taking too much political risk to invest in Iran because people will say: 'Total will do anything for money'," he told the Finacial Times.

And later he told the France 24 television station: "It is probably necessary that things get better, that Iran can again have better relations with its neighbours and the rest of the countries that today have a harsh stance towards it."

The remarks follow increasing tension between Iran and Israel over Tehran's nuclear programme.

Gas burning in Gulf
Iran has the second biggest gas reserves after Russia

The US has also recently stepped up the pressure to impose tougher sanctions on the Iranian government and companies that do business with it.

Total was the last major Western energy group to have seriously considered investing in the country's huge gas reserves.

It was also one of the few companies in the world to have the technology needed to exploit Iran's huge, but untapped gas reserves.

The BBC's Jon Leyne in Tehran says it has been particularly galling for Tehran to watch as Qatar pumps vast amounts of gas from the South Pars field to its side of the Gulf, helping it become one of the world's major energy suppliers.

But observers say it is not just sanctions or political pressure - international banks simply are not prepared to put up the billions of dollars needed for such investments in Iran.

'Provocative' missile test

Mr de Margerie's remarks come a day after state media reported that the Iranian Revolutionary Guards test-fired a updated version of the Shahab-3 missile, said to have a range of 2,000km (1,240 miles).

Map of missile range

Gen Hoseyn Salami, the Guards' air force commander, said the tests demonstrated Iran's "resolve and might against enemies who in recent weeks have threatened Iran with harsh language".

State media quoted him as saying: "Our hands are always on the trigger and our missiles are ready for launch."

Tehran has tested the Shahab-3 before, but the latest launch comes amid rising tensions in the region.

William Burns, the top official handling Iranian issues at the US state department, said the launch was "very disturbing, provocative and reckless".

But US officials played down suggestions that the move had brought military confrontation with Iran any closer.

"The reality is there is a lot of signalling going on, but everybody recognises what the consequences of any kind of a conflict would be," said Defence Secretary Robert Gates.




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