Iran Unveiled New Oil Contracts to Attract Foreign Investment

Iran unveiled a new model of oil contracts Saturday aimed at attracting foreign investment once sanctions are lifted under a landmark nuclear deal reached earlier this year, and said U.S. companies would be welcome to participate.

The new Iran Petroleum Contract replaces a previous buyback model, in which contractors paid to develop and operate an oil field before turning it over to Iranian authorities.

Iran has sweetened the terms, hoping to bring in $30 billion in new investment. The new contracts last 15-20 years and allow for the full recovery of costs. The older contracts were shorter term, and investors complained of heavy risks and suffering losses.

Investors who produced more than planned amounts received no compensation for the additional barrels. But under the new model, the more they produce, the more they will earn. Foreign investors will also have an option to extend contracts an additional five years, up to 25 years.

Some 50 upstream oil, gas and petrochemical projects are being introduced during a two-day conference in Tehran that began Saturday. Iran will pay foreign oil companies larger fees under the new contracts to provide greater incentives to investors.

Oil Minister Bijan Namdar Zanganeh told the conference that under the new contracts, foreign investors will be required to form a joint company with an Iranian partner to carry out exploration, development and production operations.

“To continue to play the role (as a major oil supplier), we hope to enjoy working with reputable international oil companies under a win-win situation,” he told the conference.

via Mainichi

Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza