Official: Iran’s new oil contracts ‘very flexible’
As Iran prepares to announce its new oil and gas contracts next week, a senior official says they take into account oil price fluctuations and investment risks.
Tehran is about to host executives of major energy companies on Nov. 28-29 to unveil its new framework for oil and gas development operations in Iran.
Head of Iran’s Contracts Restructuring Committee (ICRC) Mehdi Hosseini said the Iran Petroleum Contract (IPC), as the new model is called, will have flexible terms.
“What we are offering is a very flexible model of contracts. It is integrated exploration, development, production - all those terms,” he told Reuters.
At the Tehran conference, Iran plans to unveil about 50 projects worth $185 billion, including a combination of brown and green fields as well as exploration blocks up for development.
“We are offering some projects in the Caspian Sea and also very low-risk areas in the Persian Gulf,” he said.
Hosseini said the contracts will last for 20 years and in some special cases, they could also be extended to 25 years, not including a period for exploration deals.
“Anything will be adjusted, depending on the different stages of the operations.
“The fee per barrel that is paid as profit to the company is flexible based on the risk which is considered. Higher risk, higher reward, lower risk, lower reward,” he said.
Unlike Iran’s former buyback deals, there will be no ceiling on the capital expenditure, Hosseini said.
“Everything depends on the behavior of the fields, and the period of time. If things change then they (oil companies) would have the chance annually in the annual work program and budget to revise the scope of the work, may revise the cost. We are very open,” he said.
The Tehran conference will be followed by another in London on February 22-24.
Iranian officials are hopeful the low cost of production in the country will attract leading international developers to the new projects.
Iran is the “the world’s cheapest country” for oil production, head of investment at the National Iranian Oil Company (NIOC) Ali Kardor said last month.
“The finished cost of each oil barrel produced in Iran is about $5. This price tag doesn’t exceed $10 with the costliest of processes,” he said on the sidelines of an energy event in Tehran.
Several oil majors including Royal Dutch Shell, France’s Total, BP and Italy’s Eni have indicated interest in the new projects. American countries are also eyeing new opportunities with enthusiasm, but they are bound by US government sanctions banning any business with Iran.
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