Mon Jun 13, 2016 5:15PM
Iran’s Oil Minister Bijan Zangeneh says the first deals of the new generation of Iran’s oil sector contracts will be awarded before October.
Iran’s Oil Minister Bijan Zangeneh says the first deals of the new generation of Iran’s oil sector contracts will be awarded before October.

Iran’s Oil Minister Bijan Zangeneh says the first deals of the new generation of Iran’s oil sector contracts still need revisions but will be nonetheless awarded within the next few months.

Zangeneh has been quoted by the media as saying that the government is yet to approve the new contracts, adding that the first deal is expected to be signed before October. 

He further emphasized that Iran expects the upcoming awards to help increase its crude production by 600,000 to 700,000 barrels a day over five years.

The bulk of the surge will come from fields in an area west of the Karoun River along the Iraqi border, Bloomberg has quoted Zangeneh as telling Iran’s Persian-language weekly Seda. 

Iran’s new format of oil contracts - generally known as Iran Petroleum Contract (IPC) – is replacing buyback deals. Under a buyback deal, the host government agrees to pay the contractor an agreed price for all volumes of hydrocarbons the contractor produces.

But under the IPC, NIOC will set up joint ventures for crude oil and gas production with international companies which will be paid with a share of the output.

Under the IPC, different stages of exploration, development and production will be offered to contractors as an integrated package, with the emphasis laid on enhanced and improved recovery.

Architects of the new contract say foreign companies can no longer dash out of their contractual obligations if sanctions are ever re-imposed on Iran. But critics cite numerous shortcomings which seriously plague the new formula.

The IPC is still a source of criticism for certain technical flaws.  Iran’s First Vice President Ehsaq Jahangiri on 31 May called on Zangeneh to make some amendments to the new format of oil contracts.  

"Thank you for your efforts to take critical views into account: please present the government with your proposals for amendments for adoption as soon as possible," Jahangiri was quoted as writing to the oil minister on the government website at the time. 

Zangeneh has told Seda that a key amendment that has been made in the IPC includes removing a clause that would let NIOC offer an alternative, similar field for exploration if a foreign company failed to make a discovery in its initial site.

The text was revised after regulators sought to make clear domestic reserves belonged to the state, Bloomberg has quoted him as saying. Changes also were made to reflect demands that major decisions by the managerial committee of any joint venture be approved by the national oil company.