Experts Debate IPC Pros and Cons

Experts Debate IPC Pros and Cons Experts Debate IPC Pros and Cons

The new contractual framework for partnership with international companies in Iran's post-sanctions oil and gas projects was debated in a televised interview Saturday night, roughly a month after it was unveiled in a conference in Tehran.

Masoud Derakhshan, economic analyst and a strong critic of the Iran Petroleum Contract, went on the offensive against Seyyed Mehdi Hosseini, head of the Oil Contract Revision Committee for the new contractual framework, Financial Tribune reports.

"IPC is a return to the old days before the oil industry was nationalized," he said, drawing parallels between IPC's 20-25-year terms of cooperation with international contractors and the "prolonged presence of foreigners" in Iran before the nationalization of oilfields in 1951.

He added that the IPC disregards the political and economic importance of oil–a strategic source of income—for the Persian Gulf country. Hosseini criticized Derakhshan's "sensational" rhetoric and said a lack of money and equipment (for exploration and drilling) justifies the Oil Ministry's policy in reaching out to international companies to develop a key sector undermined by years of underinvestment due to sanctions.

In late December, Tehran unveiled 52 oil and gas projects worth an estimated $185 billion in a two-day conference that brought together more than 1,300 officials and representatives from 335 domestic and foreign companies.

Hosseini was at the helm of the special committee that was formed shortly after President Hassan Rouhani took office in 2013 to revise the lackluster buyback contracts that were in place over the past 20 years.

The IPC has been a subject of debate over the past few weeks. Opponents proclaim the new framework is essentially a concession of hydrocarbon reserves to foreign contractors; proponents say the development of oil and gas fields is bound to using foreign technology and investment.

Derakhshan also criticized what he called the "secrecy" of the terms of the contract and the inclusion of foreign companies, such as Britain's BG, Repsol of Spain and French oil and gas major Total in IPC's drafting process.

Hossein responded by describing the IPC as one of the world's most transparent oil contracts and said the Oil Ministry called forth the internationals who were previously active in the Iranian energy industry to put into perspective the limits of previous contracts and global expectations for a new round of foreign cooperation.

Iran holds the world’s second biggest natural gas reserves after Russia, and the fourth-largest proven crude oil reserves, making the country a hotspot for energy investment after the sanctions relief.

Masoud Mirkazemi, a former petroleum minister and the current head of Majlis Energy Commission, joined the debate through a phone call. He raised doubts on whether Iran's nuclear program, officially known as the Joint Comprehensive Plan of Action, would serve the country's interests in oil and gas contracts with internationals.

Referring to the so-called snapback mechanism of sanctions, Hosseini said without elaboration that all scenarios are anticipated in the new contracts.

In a statement in November, Oil Minister Bijan Namdar Zanganeh said a negative political turnaround "would be to the detriment of foreign investors", because they would no longer be able to get a return of capital and Iran will not pay interest for their blocked revenues in oil and gas projects.