Short extension to Iran nuclear talks proposed as deadline looms

Iran and the P5+1 have been engaged in very intense negotiations since 2 July in a bid to achieve a comprehensive nuclear deal before the 20 July deadline. Though the deadline can be extended by up to six months, all parties involved are interested in finalising the deal soon.

The two sides agree that significant gaps remain, mainly on the issue of enrichment capacity. This translates into the number of centrifuges, production capacity, and stockpiles of enriched uranium. Various formulae could achieve the Western goal of prohibiting the breakout capability of the Iranian programme, defined as the point at which there is a sufficient quantity of highly enriched uranium to fuel a weapon.

Iran’s latest offer has included a freeze on enrichment to maintain the current capacity of about 9,000 centrifuges instead of reducing that now and allowing it to grow in the future. This suggestion is now being considered in Washington, but insiders there told Menas Associates that 9,000 spinning centrifuges would not offer enough leverage to President Obama to push back congressional pressure against sanctions relief.

It looks very likely that the two sides will agree on an extension of the talks by a few weeks, not by six months. That would allow them to close the gap between their positions, but there is also another important advantage: the US Congress will be on its summer break in August and if the comprehensive agreement is signed in mid-month, there will be no immediate congressional opposition.

Washington and Tehran have achieved their core objectives and are now attempting to make the deal more attractive to their domestic stakeholders. At the same time, each knows that it will be easy for the other to undo the progress made so far and return to the escalatory mode of the past few years.

A deal is thus likely in August and will then be implemented over the next two years, ultimately leading to a working relationship between Tehran and Washington and an improvement of ties between Iran and the European Union.

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

© 2014 Menas Associates

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

Iran to spend $2.2 billion on gas projects

Iranian deputy oil minister, Alireza Zeighami ,has said that the government has allocated $2.2 billion for seven gas production and refinery renovations. Presently, all seven projects are 70 per cent in the completion stage, and are expected to be finished in the near future.

“Once the projects come on stream, 12 million lt of gasoline would be added to the country's production capacity and 70 per cent of the nation's demand to the product will be met,” said Zeighami.

“Two billion dollars of the mentioned amount will be allocated to Tehran, Abadan, Esfahan, Tabriz, Bandar Abbas, Imam Khomeini and Lavan gasoline production refineries,” he said.

"The rest $200 million will be spent specially to speed up the completion of underway plans," added the deputy oil minister.

Source: Tehran Times

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