Iran's Oil Contracts Immune to Political Disruptions

Iran's Oil Contracts Immune to Political DisruptionsIran's Oil Contracts Immune to Political Disruptions

An official at the National Iranian Oil Company says the new oil contracts will include provisions that ensure they will remain effective against any political disruptions in the future.

"Once a deal is signed with a foreign company under the framework of the Iran Petroleum Contracts, both sides are legally obliged to fulfill the terms of the contract and change in government cannot undermine the deal," Ali Akbar Mahrokhzad, NIOC director for legal affairs, was quoted as saying by Shana on Saturday.

Even if the international restrictions on Iran's nuclear program are re-imposed, the contracts will remain valid according to the letter and spirit of the nuclear agreement signed between Iran and the six world power, known as the Joint Comprehensive Plan of Action.

Oil Minister Bijan Namdar Zanganeh appeared before the parliament in a closed hearing last week to address concerns over the new oil contracts that have been criticized by the opponents of the government.

ISNA quoted a member of parliament as saying that "most lawmakers were convinced by Zanganeh's explanations" about the IPC during the three-hour grilling.

Two years of delay in introducing the IPC have impeded production from joint fields while neighboring countries are making the most from the shared reserves.

Mahrokhzad said NIOC is close to preparing a final draft of the new contracts.

“What has raised questions and ambiguities about the new contractual model is that the debates are normally based on generalities of IPC. Details of the IPC final draft will resolve the ambiguities,” he noted.

Iran has been working on the IPC to bring back multinationals to its key oil and gas sector after years of underinvestment due to punitive economic sanctions.

Gholamreza Manouchehri, the deputy for development and engineering affairs at the NIOC, said on Saturday that if everything goes according to plan, Iran will sign 2-3 contracts under the new model before the fiscal year is out in March 2017.

Officials have said in the past few weeks that Tehran will sign the first oil contracts under IPC framework within two months.

------- IPC Considerations

Mahrokhzad added that all technical, legal and financial considerations have been incorporated in the IPC drafs.

“Production is the goal of the contracts and repayment to the investor [or the contractor] is only made when the objectives enshrined in the contract are fulfilled. In other words, if the contractor withdraws from a project at any stage before production, no repayment will be made. Therefore, higher production is the contracts’ guarantee,” Mahrokhzad said.

Iran plans to boost crude production to 5.8 million bpd in 10 years, including 4.8 million barrels of heavy crude and 1 million bpd of gas condensates, a type of light, sweet crude found in the Persian Gulf's gas layers.