Iran's Oil Minister Building Bridges on Domestic Oil Dispute

Majlis Speaker Ali Larijani says the oil minister's explanations on IPC were constructive and most parliamentarians are on board with the core of the contracts but demand some amendments
IPC is billed as a replacement to buyback contracts that are not appealing enough to foreign investors.IPC is billed as a replacement to buyback contracts that are not appealing enough to foreign investors.

Oil Minister Bijan Namdar Zanganeh took the debate on Iran's new model of oil contracts to the parliament on Sunday in what appeared to be the next step to bridging the divide between the government and critics of Iran Petroleum Contracts.

Following the three-hour hearing held behind closed doors, some lawmakers and analysts came out to support IPC that has been a moot point since it was first unveiled at an international conference in Tehran last year.

Majlis Speaker Ali Larijani said Zanganeh's explanations were "constructive" and "most parliamentarians were on board with the core of IPC but demand amendments to some of the terms and conditions".

Homayoun Hashemi, representative of Miandoab County in West Azarbaijan Province, said the new contracts will ease the transfer of foreign investment and technology in energy sector.

"Iran is extracting (oil and gas) at a lower rate compared to its neighbors in the Persian Gulf region," the official said, voicing support for IPC that is focused on boosting extraction from joint fields.

Behrouz Nemati, a member of Majlis Energy Commission, said some of the critics said after the Sunday session that they were not against the contracts anymore.

"Some issues such as the so-called 15 amendments that include ownership of reservoirs, transfer of technology, sovereignty (over underground resources) and presence of Iranian firms as partners have been addressed by the Oil Ministry," he said.

Zanganeh reportedly expounded on amendments made to 15 terms and conditions that had been singled out by the Leader of Islamic Revolution Ayatollah Seyyed Ali Khamenei.

Remunerations of foreign contractors and ownership of hydrocarbon reserves have been the main sticking points of the new contracts.

Ali Golmoradi, another member of the commission, said the outlines of IPC have been ratified, but some revisions need to be made before setting the contracts in motion. He added that the Majlis and government will continue to hold talks over the new contractual model.

According to several parliamentarians and analysts, IPC does not need the Majlis approval to come into effect.


Zanganeh's clarification was also seen as a sign of rapprochement over the new model of contracts, which has been subject to scathing criticism by some domestic opponents in recent months.

"It was believed that these contracts have a lot of problems, but objections abated following the minister's report as he answered to the critics," said Asadollah Gharehkhani, speaker of Majlis Energy Commission.

Some domestic opponents say IPC would allow foreigners cheap access to Iran's massive hydrocarbon resources under long-term contracts.

Advocates argue that Iran needs to make up for years of underinvestment in the energy sector by sweetening the terms of oil and gas contracts.

Another member of parliament lent his support to Zanganeh who is pushing to hold tenders for several oil and gas projects under the IPC framework this year.

"The oil minister's stance is based on the country's long-term interests … Zanganeh clearly elucidated the issues, which met with the positive response of members of parliament," Gholam Mohammad-Rezaei, a member of Majlis Industries and Mines Commission, said in a statement.

IPC is billed as a replacement to buyback contracts that are not appealing enough to foreign investors. The framework is getting closer to being finalized after it officially got the backing of the government as well as the Resistance Economy Headquarters—a top government advisory body—last month.