Thursday, 20 March 2014

Iran unveils contract model

The Ministry of Petroleum unveiled the draft model of its new oil and gas contracts, which is aimed at drawing more foreign companies to the Iranian hydrocarbon sector. The Iran Petroleum Contract (IPC) was announced in Tehran by Mehdi Hosseini, who heads a ministry-appointed committee to revise oil contracts.

‘In the new contracts, different stages of the petroleum industry (exploration, development, and production) are commissioned in an integrated manner,’ Hosseini told a forum organised to introduce the contracts.

The IPC is replacing buy-back contracts, which are no longer attractive to foreign companies. Under a buyback deal, the host government agrees to pay the contractor an agreed price for all volumes of hydrocarbons the contractor produces.

Under the IPC, the National Iranian Oil Company will form joint ventures in crude and gas production with international companies to manage projects, provide financing, and maximise hydrocarbon recovery, Hosseini said.

The official emphasised that the new contracts will offer higher fees for riskier exploration and production projects but that ‘ownership of reservoirs is not transferrable. Under new contracts, Iranian experts will work shoulder to shoulder with foreign investment companies in order to become familiar with the latest technologies of the world.’

The new contracts are also intended to raise the recovery factor of Iranian oil fields, half of which are in their maturity period. Iran needs US$150 billion of investments in its upstream oil and gas industry in the next five years, and the share of foreign investment in the contracts therefore had to increase.

Iran expects to attract US$100 billion in investment in its energy sector over the next four years after the new model takes effect.

For more news and expert analysis about Iran, please see Iran Strategic Focus.

© 2014 Menas Associates

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