Ministry Finalizing New Oil Contracts

Ministry Finalizing New Oil ContractsMinistry Finalizing New Oil Contracts

Iran's Oil Ministry is sweetening its oil contracts to attract foreign investments, which is expected to be finalized in three weeks.

"We are trying to gain access to regional and global markets, and have long-term strategic cooperation with major companies," Oil Minister Bijan Namdar Zanganeh also told Shana on Monday.

The oil industry is suffering from years of underinvestment. It was directly targeted by sanctions to restrain Iran's civilian nuclear energy program. Now, with the upcoming lifting of sanctions, oil and gas officials have set their sights on getting the industry back on its feet. To do so, new contracts drafts are being drawn up at the Oil Ministry.

The ministry expects to finalize the new oil contracts soon, as Tehran seeks to boost recovery from its fields with the help of foreign companies. Limited investment, US sanctions and decline in production have reduced Iran's ability to recover oil from its mature oilfields. Production at oilfields is declining nearly 10% each year. Thus, the ministry is seeking better extraction technology.

The ministry is expected to present the new oil contracts to investors at a conference in London in December, ahead of a likely lifting of international sanctions in 2016.

"We are hopeful that this new model is approved by the government within this [current Iranian] month [Sept. 22]," he said. Another investment priority is oil and gas fields shared with neighboring countries. Over 20 hydrocarbon fields are shared with Kuwait, Iraq, Qatar, Bahrain, the UAE, Saudi Arabia and Turkmenistan.

Iran and six major world powers reached a landmark nuclear deal on July 14, clearing the way for an easing of international sanctions on Tehran, higher oil exports and more international investment in undeveloped oil and gas fields.

Iran is aiming to add 500,000 barrels per day to production within two months of easing western sanctions that have halved shipments in recent years, and as much as 1 million bpd in six to seven months. Nevertheless, analysts expect the new low oil price cycle to last around a decade. Oil fell below $49 a barrel on Monday after its biggest two-day rally in six years last week, pressured by a supply glut and renewed concern about a hard landing for China's economy, Reuters reported.

International benchmark Brent crude climbed 10% last week but was still heading for its fourth straight monthly decline and has risen in only two of the past 14 months.