Iran to Maintain Grip on Oil, Gas Contracts

Iran to Maintain Grip  on Oil, Gas ContractsIran to Maintain Grip  on Oil, Gas Contracts

A top oil official said international firms will face fines if they fail to meet any of their contractual obligations in Iran's new oil and gas projects.

"Foreign companies and contractors are bound to transfer technology and will be penalized if they fail to do so," Mohammad Reza Moqaddam, deputy oil minister for research and technology, said in a news conference, IRNA reported.

Iran unveiled a new framework for its oil and gas contracts last year to lure international firm back to its sanctions-hit energy sector with more attractive financial terms.

The country has also stipulated a set of prerequisites for foreign cooperation in its oil and gas projects, including the transfer of technology.

However, Moqaddam intimated that the demand could prove to be a tall order, if Iran sits back and does not invest in its own energy projects.

"Exploration and production projects require the financial contribution of both Iranian and foreign sides. The contribution could be trivial in the first step, but Iranian firms need to equally take financial risks shoulder to shoulder with their foreign counterpart," he said.

"With the limited investment of Iranian firms in any given project, foreign companies cannot be expected to hand over their technological advantages all at once."

Moqaddam noted that the transfer of knowhow may become a slow process.

Years of sanctions and trade embargos against Iran stripped the Persian Gulf nation of vital foreign direct investment and technology for its oil and gas sector, which is the pivot of the country's economy.

But the landmark agreement between Tehran and six world powers in July and its ensuing implementation on January 16 has given international companies a fresh impetus to return to the Middle East's resurging economic and energy sector.

------- Partnership    

Another pivotal term in the new contracts calls for the partnership of any foreign enterprise with an Iranian firm, with the latter holding a 51% stake in the joint venture and the rights to own the venture over the years.

But the framework of partnership has been one of the highly-disputed and most opaque terms of the new contracts that have yet to be fully disclosed to international investors or Iranian firms.

The partnership is aimed at linking domestic private sector with the world's oil and gas heavyweights to foster large Iranian energy companies in the long run.

However, there are legal obscurities on how the government can invest national assets in a venture between a privately-run Iranian firm and a foreign entity that entails financial risks.

Tehran was set to unveil more details of its new contracts, known as Iran Petroleum Contracts, in a conference earlier this year, but it was put off to an unspecified time and place.