Bound by economic sanctions, Iran is presently seeking investment to help develop its oil and natural gas, plans to offer international energy companies more attractive contracts than neighboring Iraq, as revealed by oil ministry advisor.
The Islamic republic is developing a new type of contract that’s “in line” with international practice and law, Mehdi Hosseini, who leads a ministry committee reviewing oil contracts, said at a news conference in Tehran today. The new model will be more flexible and advanced that those investors encounter in fellow OPEC-member Iraq and will differ from what’s available elsewhere, he said.
Mr. Hosseini further remarked, “Any new model will have to be win-win for all parties involved,” adding that, “The new contract is our own type. We haven’t given it a name.” He reiterated that Iran plans to introduce the new contract at a conference in London in late June or early July. The Persian Gulf state will curtail use of existing buy-back contracts, he said.
Iran’s buy-back arrangements require companies to pay for oil and natural gas exploration and recover their investment from any production at a pre-arranged rate of return. Hosseini said in November that the country, hampered by sanctions over its nuclear program, was working on more investor-friendly contract terms that conform more closely with international practice.
Iran, the fifth-largest producer in the Organization of Petroleum Exporting Countries, will resume negotiations with world powers over its nuclear activities on Feb. 18 after reaching a preliminary deal in November. The two sides seek a comprehensive accord to ensure Iran’s nuclear program is non-military, as it says, and end international sanctions against the country. Iran is losing as much as $5 billion a month in oil sales because of sanctions.
Hosseini also said that the nation needs as much as $150 billion in investment over the next five years to develop its oil and gas, and Iranian officials expect most of the money to come from foreign companies.
The central government of Iraq, which overtook Iran as OPEC’s second-biggest member in 2012, pays investors a fixed fee for any oil they produce. Iraq’s semi-autonomous Kurdish region offers production-sharing contracts, which many foreign companies prefer as more lucrative.
Iran will give a preview of its new investor contract to a domestic audience at a two-day conference in Tehran starting Feb. 22, Hosseini said. International representatives are welcome and some European and Asian companies have expressed interest in the event, he said, without identifying any of them.
Iran’s oil reserves of 157 billion barrels are the world’s fourth-largest, and it holds the biggest gas reserves, estimated at 1,187 trillion cubic feet, according to BP Plc’s Statistical Review published in June 2013.