This past Saturday, Tehran hosted 137 companies from 45 countries for a two-day conference, during which legal generalities of Iran’s new model of oil and gas contracts were introduced. More details about the contracts will be unveiled at a conference likely to be held in London in March (or February) 2016.
The legal generalities of the contracts show that they will cover exploration, development, and production in many of the fields. Moreover, the parties will hold a stake in the output for more than two decades. The foreign partner stake will be less than 50%.
However, it is unclear how the output percentage system will work in gas projects. Considering that Iran’s gas contracts will be secured largely for the South Pars gas field, where will the gas intended to be delivered to foreign companies be sent to? Inside Iran, foreign companies are not able to sell gas to consumers due to the country’s subsidy reform plan, because gas prices inside Iran are much less than regional and global prices.
The contracts are not guaranteed by the Oil Ministry or the Central Bank of Iran. Each foreign company is obliged to incorporate an Iranian partner, so that operation will be alternatively changed between Iranian and foreign partners. Therefore, transfer of technology and knowledge by the foreign company to its Iranian partner will be inevitable.
Also, the foreign company will be obliged to take protective production measures and increase oil recovery rate, which is normally about 20%.
The Iranian Oil Ministry will announce details about the terms and conditions of each oil and gas field within related tenders for foreign companies. Technical and financial details of the projects are still unknown.
FAR law firm