Iran on Wednesday approved the outline for the new generation of its oil and gas contracts, dubbed Iran Petroleum Contract, taking the OPEC member a step closer to welcoming foreign investment in its energy industry and boosting production even more into an oversupplied market.
The outline was approved in a Cabinet meeting on Wednesday presided by President Hassan Rouhani, Bloomberg reported.
The draft of the general conditions, structure and patterns of the upstream petroleum and gas contracts which included more than 150 minor and major changes ... was given final approval in today's cabinet meeting, according to the Oil Ministry's Shana news agency.
Priority will be given to boosting production at jointly owned oil and gas fields, Oil Minister Bijan Namdar Zanganeh said.
The government wants to attract international oil companies that can make long-term investments worth billions of dollars and bring cutting-edge technology into Iran after international sanctions that restricted its crude supplies were eased in January.
Big oil companies such as Italy’s Eni and France’s Total have expressed interest in developing Iran’s oil and gas fields. Tehran has been working on the oil contract model for the past two years, hoping to attract $50 billion a year.
It is already succeeding in meeting its pledge to regain market share it lost due to the sanctions over its nuclear program. Production was 3.55 million barrels a day in July, 27% higher for this year and the most since December 2011, according to data compiled by Bloomberg.
------- Lengthy Process
“Any process is going to take time and a lot of steps before any investment goes into the ground,” Edward Bell, commodities analyst at Emirates NBD in Dubai, said by phone. “This isn’t going to be a step change in the way markets are going now.”
Brent crude prices fell 15% in July amid a growing recognition the global surplus of crude will take time to clear. Iran seeks to reach an eight-year high for daily output of 4 million barrels by the end of 2016, with foreign investment helping it regain the position as OPEC’s second-largest producer. It was third-largest in July, according to data compiled by Bloomberg.
The Oil Ministry will review each contract to be signed by potential new investors, including details on price, duration and other terms of the project.
Investors will want to know exactly what conditions they will face in Iran, such as joint venture regulations and dispute resolution, Emirates NBD’s Bell said. “Once we get the full details on that, we will get a much better sense of how attractive the contracts are.”
