* CNPC has put thorough contingency plans in place
* CNPC has acquired some expertise operating offshore
* Banking unit Kunlun could be funding, clearing vehicle
By Chen Aizhu
BEIJING, May 11 (Reuters) - China's state-owned energy major CNPC is ready to take over Total's stake in the giant Iranian South Pars gas project if the French company leaves amid newly announced U.S. sanctions, industry sources said.
The United States this week said it would impose new sanctions against major oil and gas producer Iran after abandoning an agreement reached in late 2015 that limited Tehran's nuclear ambitions in exchange for sanctions relief.
While the new sanctions are unilateral, many companies, including Japan's Inpex, already appear to be bowing to Washington's pressure and abandoning projects in Iran.
If Total walks away from the South Pars field, which has the world's biggest natural gas reserves ever found in one place, CNPC is prepared to step in, the sources said.
It was not clear whether CNPC had received top government approval to do so. But such a move could further strain the tense trade relationship between Beijing and Washington.
Reuters reported in December that a $1 billion deal signed last July gave the Chinese firm the option to take over Total's stake if it left Iran.
Since then, the Beijing-backed giant has conducted significant due diligence and planning, several high-level industry sources told Reuters.
"The possibility of Total's pullout is quite high now, and in that scenario CNPC will be ready to take it over fully," said a senior state oil official with knowledge of the contract.
An executive with direct knowledge of the project added that planning began "the day the investment was approved."
"CNPC foresaw a high probability of a reimposition of (U.S.) sanctions," the executive said.
All the sources spoke on condition of anonymity because they were not authorized to speak to media.
Under the terms of the agreement to develop phase 11 of South Pars, CNPC could take over Total's 50.1 percent stake and become operator of the project.
CNPC already holds a 30 percent stake in the field, while Iranian national oil company subsidiary PetroPars holds the remaining 19.9 percent.
So far, the Chinese oil giant, which already operates two oil fields in Iran, has spent about $20 million on planning to develop the field, the sources said.
Despite CNPC's preparations, the two sources said they were not aware of any meetings between Total and CNPC after Trump's move.
CNPC and Total declined to comment.
A source close to Total said the French company was analysing the impact of new sanctions and whether it could get a waiver that would allow it to keep its stake.
An experienced onshore oil and gas producer, CNPC is relatively green in offshore drilling. Most of its experience lies in its subsidiary China Petroleum Offshore Engineering Company (CPOE), which has worked in shallow waters off north China.
The South Pars gas reservoirs are buried beneath the seafloor, 70 metres underwater.
The project will have a production capacity of 2 billion cubic feet per day, or 400,000 barrels of oil equivalent per day, including condensate, Total has said.
At current market prices, the whole reserves of the field, which Iran shares with Qatar, would be worth around $2.9 trillion.
The field is set to start supplying the Iranian domestic market in 2021.
CNPC is prepared to use its banking unit Bank of Kunlun Ltd as a funding and clearing vehicle if it takes over operation of South Pars, the second senior state oil official said.
The bank was used to settle tens of billions of dollars worth of oil imports during the UN sanctions against Tehran between 2012 and 2015, the official added.
Most of the bank's settlements during that time were in euros and Chinese renminbi. The U.S. Treasury sanctioned Kunlun in 2012 for conducting business with Iran.
If CNPC goes ahead, it would also likely have to develop crucial equipment, such as large-powered compressors needed for developing gas deposits on this scale, on its own.
Leading manufacturers like U.S. firm GE and Germany's Siemens could be barred from supplying to Iran under U.S. sanctions.
Additional reporting by Bate Felix in Paris and Ron Bousso in London; Editing by Henning Gloystein and Gerry Doyle