Call for Better Incentives to Entice Oil Firms

Call for Better Incentives to Entice Oil FirmsCall for Better Incentives to Entice Oil Firms

Iran needs to offer better incentives to lure foreign energy companies forced by low oil prices to slash investments, the head of Austrian energy group OMV said ahead of a trip to the country next month.

Tehran reached a historic deal with world powers last month to curb its nuclear program in exchange for sanctions relief that could trigger an influx of billions of dollars into the country, Reuters reported.

"Iran is a big opportunity for OMV," OMV's new chief executive, Rainer Seele, told reporters.

He said Iranian production sharing agreements were not good enough. However, he acknowledged "a strong will to offer attractive conditions" on the part of the Iranians.

Recently, Tehran said it has identified nearly 50 oil and gas projects worth $185 billion that it hoped to sign by 2020. OPEC-member Iran has the world's largest gas reserves and is fourth on the global list of top oil reserves holders.

In negotiations with potential foreign partners, Iran said it had defined a new model contract—called an integrated petroleum contract—offering longer terms and more liberal conditions.

Full details are expected in the next few months.

Oil prices dropped more than 15 percent in July and have roughly halved in the past year mostly due to an expanding global glut, forcing oil companies, including OMV, to slash their investment programs.

"If we get active in Iran in the future, this would compete with other opportunities at a time of limited investment volumes, which we face in this phase of low oil prices," he said.