Mehdi Hosseini, an adviser to Irans oil ministry and the man tasked with drafting the Iran Petroleum Contract expects Hassan Rouhani, the president, to approve the new contract in the coming months, with details to be announced by the end of the year.
The current system of buyback contracts, which does not allow companies to book reserves or take equity stakes in Iranian companies, has proved hugely unpopular with multinationals and deterred investors even before sanctions were tightened.
The Islamic republic, which has the worlds largest gas reserves and fourth-largest oil reserves, has ambitious plans to increase its oil production capacity to about 5m b/d by the end of the decade and has been working to revise the contracts for almost two years. Completion of the process would mark a huge change for a regime traditionally wary of foreign ownership of its oil and gas sector.
The nature of the contract remains vague. It will be a service contract, Mr Hosseini said, which will have a flexible fee, one that addresses the risks of each project and takes market fluctuations into consideration. Under some circumstances, reserves can be booked, but foreign companies will not be able to own oilfields, he said without giving further details.
Details of the scheme and the dozens of available upstream offshore and onshore oil and gas projects will be released at an investment conference in London, probably in December.
By then, US oil majors, which left in 1979 after the Islamic revolution, should be able to participate, assuming a nuclear deal has been signed between Iran and the six powers. A June 30 deadline has already been missed.
The value of these contracts may exceed $100bn, Mr Hosseini told the Financial Times. The conference had been scheduled for September. Any fresh delay is due to logistical issues, he said, pointing to the gap between signing a nuclear deal and the lifting of sanctions.
What is the point of holding the conference if international oil companies cannot participate at the highest levels because of continuation of sanctions-related issues? he said. We are not waiting for the Americans but it is better if they come and we hope they do which will mean more competition between Americans and Europeans and that will be better for us.
Executives from Royal Dutch Shell and Italys Eni have already visited Iran to discuss new investments, amid rumours that other western companies have followed suit.
Oil majors such as Frances Total, Shell, Eni and Norways Statoil which have been invested in Iran since the late 1990s despite sanctions have refused to develop more fields because of the low rate of return under the buyback contracts and Irans failure to cover unexpected cost overruns.
Even as companies welcome any overhaul to the contracts, many still voice caution. If anyone thinks negotiating with Iran over oil projects is easier than nuclear negotiations is completely wrong, said a western oil consultant in Tehran.
Irans oil exports have halved from more than 2mbpd in 2012, when sanctions were introduced, and Tehran does not have access to most of its oil revenues, estimated at $100bn, stuck in Asian banks.
Iran insists it will regain its market share, much of which was lost to Saudi Arabia and other Gulf states, once sanctions are lifted, even if this leads to further oversupply. Iran will not sit idle, said Mr Hosseini. There will be competition and Iran will adopt policies by which there should be place for us, too, or there will be no place for others.
By Financial Times
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