News ID: 154804
Published: 0733 GMT July 11, 2016

Oil Ministry hopes for new contracts by September

Oil Ministry hopes for new contracts by September

The new Iranian oil contract, known as Iran Petroleum Contract (IPC), will be finalized in the next one and a half months. The first contract is expected to be signed in three to four months’ time, the Deputy Oil Minister for International Affairs Amir Hossein Zamani-Nia said.

In November 2015, Iran brought 49 oil and gas fields into the framework of the new contracts to foreign investors, based on which foreign companies will be responsible for the financing and technical development of the projects, wrote.

For the first time in over 65 years, Iran will allow foreign companies to hold a share of oil and gas output. The new contracts, unlike the buyback contracts, will run for 20-25 years.

Zamani-Nia said representatives of 150 foreign companies had met Oil Ministry officials over the past two years, but no contract had been signed on the previous model.

European majors Total and Shell have announced that they will not invest in Iran based on buyback contracts.

Investments in global upstream oil and gas sector, which had been doubled between 2001 and 2013, cut to half last year and hit $250 billion.

Iran shares 27 oil and gas fields with neighboring countries, mostly with Arab states. It is said joint fields account for 30 percent of Iran’s gas reserves and 20 percent of its oil reserves.

Recently, Iran said three types of contracts have been developed and just joint fields will be offered based on the news model of contracts.

Zamani-Nia said that development of joint fields and increase of oil recovery rate are prioritized. The recovery rate in Iran’s oilfields is around 25 percent on average. Modern technology is needed to increase the rate. Some countries have increased the figure to 40-60 percent.

Iran’s oil resources are estimated at 500-600 billion barrels. So at least 158 billion barrels of oil could be recoverable. The chairman of the Iranian Oil Contract Restructuring Committee Mehdi Hosseini has said that the country will lose $4 billion for each month of delay in implementing new contracts. The figure will be doubled if indirect costs are taken into account, he noted.

Zamani-Nia said $185 billion projects have been defined for the next five years in the country’s oil sector and “we expect to attract at least 40-50 billion dollars annually. Moreover, the Iranian oil situation will be improved in the next three to four months when the new contracts are to be signed”.

Zamani-Nia said the new contracts oblige foreign companies to select an Iranian partner and to rotate the operation of the field in order to transfer experience to Iranian companies.

Longer-term deals will incentivize foreign firms for increasing recovery rate and, consequently, their profitability in the long run.

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