Long-term oil contracts help Iran safeguard its national interests and rights, but also handle economic crises like sanctions successfully, vice president of Iran Chamber of Commerce, Industries, Mines and Agriculture said on Saturday.
"The more we are connected to the international community, the less harm will be inflicted on our economy due to sanctions, as foreign enterprises whose interests are linked to ours will do their best to defend our rights as well as theirs," Pedram Soltani was quoted as saying by ILNA.
According to the official, oil supply and demand balance have changed and comparing old buyback contracts with the new ones, aka Iran Petroleum Contract, is definitely wrong as the former had neither attraction for investors nor could guarantee the long-term presence of foreign contractors in Iranian projects.
"Consequently, modifying the old contracts ought not to be considered an economic retreat, as they are justified and based on financial principles," he said.
Pointing to the return on investment in Iran's oil projects, Soltani said that as long as ROI in Iran is less than what other states offer, efforts to attract foreign investment will not yield fruit and the opponents of IPC seem to be oblivious of this fact.
ROI measures the amount of return on investment relative to the investment’s cost. To calculate ROI, the benefit or return on investment is divided by the cost of investment and the result is expressed as a percentage or a ratio.
Underscoring the fact that foreign investors cannot reap as much benefit as the Iranian National Oil Company, Soltani said if profit margins offered by the Persian Gulf littoral states, especially Saudi Arabia, are more appealing, foreign firms will never embark on joint ventures in Iran.
"Under the current circumstances and given the low oil prices, being idealistic about new contracts is a big mistake, as they will definitely fail to satisfy foreign enterprises' desires, the result of which would be derailing Iran's plan to attract their investment,” he said.
"The new Iranian oil and gas contracts are in line with Article 44 of Iran's Constitutional Law as they do not pass the [oilfield] ownership to international giants."
Stressing that foreign companies used to be involved in Iranian oil projects, the official said IPC will do the same thing under new terms that have been added to contracts to help increase efficiency and motivate foreign contractors to undertake projects with the state-of-the-art technology, which will eventually be transferred to Iran.
"IPC will definitely play a key role in improving Iran's relations with developed states," he said.
Soltani said IPC is categorized as an engineering, procurement and construction contract, in which the contractor will carry out the detailed engineering design of the project, procure all the equipment and materials, and then deliver a functioning facility to their clients.
"Having no limitations, foreign investors can invest as much as they like in downstream industries, including refineries," he said.
Soltani stressed that according to the law, foreign investors do not need an Iranian business partner in such projects, most of which are located in free economic zones.
Iran unveiled its new contracts for more than 50 oil and gas development projects in a major conference in November.
Majlis Speaker Ali Larijani and Oil Minister Bijan Namdar Zanganeh have recently called on opponents of Iran’s new oil and gas contracts to abide by Iran's constitution, as they tried to ease tensions following last week’s protests outside the Oil Ministry headquarters in Tehran.
IPC has been a subject of dispute among officials and experts. Opponents say it is essentially a concession of Iran’s rich hydrocarbon reserves to foreign companies, with one analyst saying the new contracts are “a return to days before the oil industry was nationalized”.
On the other hand, proponents say the development of oil and gas fields requires foreign technology and investment, stressing that a lack of money and equipment justifies the Oil Ministry’s policy in reaching out to internationals.
