Oil Majors Seek Good Contractual Conditions

Oil Majors Seek Good Contractual ConditionsOil Majors Seek Good Contractual Conditions

Iran should offer lucrative contract terms to draw back international oil companies at a time when the oil industry is more focused on profitability, as it gears up for a longer period of low oil prices, executives said on Tuesday.

Iran said in September it had approved a draft of international oil and gas contracts to attract foreign investors and oil buyers once international sanctions are lifted but has not provided details so far, Reuters reported.

The OPEC member will announce new oil and gas contracts at conferences in Tehran and London on Nov. 21-22 and Feb. 22-24 respectively.

"It is not only questions of resources or opportunities, it is a question of profits," Total's chief executive, Patrick Pouyanne, told a conference in Abu Dhabi, capital of the UAE.

"We will be well positioned to look at opportunities in gas, oil, petrochemicals and marketing. But all that is subject to good contractual conditions, so we will see," he said.

Pouyanne said Total was likely to attend the Tehran conference where the Oil Ministry will reveal the framework of the contracts.

Iran's revised oil contracts are a major improvement not only over the buyback ones but also on those that neighbor Iraq offered in 2009-10.

Oil majors have said they would return to Iran if it made big improvements to the pre-sanction buyback contracts, which some foreign companies complain made them no money or even incurred losses.

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"Today buyback contracts would not attract anyone for the lack of oil price upside and reservoir upside," Shell's integrated gas director Maarten Wetselaar told a news briefing.

"Iraq would today also struggle to get those contracts away."

Oil companies operating in southern Iraq, such as Shell and Total, have often complained about the tough terms offered by Baghdad as well as security concerns and infrastructure constraints.

"At the moment, the industry is more constrained in financial resources rather than opportunity-constrained," Wetselaar said, adding that this had been shown by some recent auctions in places such as Mexico generating tepid interest.

The sanctions have halved Iran's oil exports to around 1.1 million barrels per day from a pre-2012 level of 2.5 million bpd. The loss of oil income has hampered investment in new development.

Iranian officials say they would be able to raise crude production by 500,000 bpd within a week after sanctions are lifted, and by another 500,000 bpd few months after that.

But many are skeptical, saying Iran would need billions of dollars in investments and the knowhow of foreign companies help boost its production after years of underinvestment.

"Iran will probably be able to put in the market 400,000-500,000 bpd but then after it would take time," said Pouyanne.