IPC Will Help Improve Technology, Growth Rates

Winning foreign investors' trust to finance mega oil and gas projects will not only help ensure  economic growth and prosperity in the long term but also help it gain access to advanced knowhow,  the secretary general of the Federation of Iran's Energy Exports and Associated Industries said. 

"Iran's petroleum sector has suffered from a protracted spell of underinvestment and that is why we lag behind our neighbors in developing oil and gas fields. But the new model of oil contracts— the  Iran Petroleum Contract (IPC)— can pave the way for plugging the technological holes in upstream projects," Hamidreza Salehi was quoted as saying by ILNA on Wednesday.

Pointing to Iran's capacity to emerge as a regional energy hub, Salehi noted, "Attracting foreign investment via long-term deals with energy giants will oil the wheels of the economy by creating much-needed jobs."

According to the official, Iran needs to spend billions of dollars in its oil industry, the pillar of its economy, and most of the funding should come from foreign sources.

"Signing contracts with companies like Total and Shell will provide security for us," Salehi said, adding that such collaboration can translate into new business opportunities for local companies and workforces.

Referring to Iran's marginal role in the oil and gas market despite its huge reserves, Salehi asserted that teaming up with big names including BP, Italy's Eni, Austria's OMW, Russia's Gazprom and Danish conglomerate Maersk Group can help the National Iranian Oil Company not only reclaim its lost share but also emerge as a leading player in the increasingly saturated market.

"The longer IPC-based oil deals are postponed, the more sanctions-busters will be able to import low quality equipment," he said, adding that the economy is still heavily reliant on oil export revenues and nothing can help it as much as developing joint oilfields with the energy majors.

Tehran unveiled 50 oil and gas fields and details of the IPC in late 2015, but it has yet to sign the first oil deal under the new model of contracts. 

The new model of contracts have been devised based on "soft diplomacy" by President Hassan Rouhani's administration in a bid to open up the energy sector and other key industries to foreign investment and technology.

Officials say the new contracts have more flexible terms that take into account global oil price fluctuations and investment risks. IPC contracts will be used to develop large-scale upstream projects, replacing a lackluster buyback model that dominated most oil and gas projects in the past two decades.