November 27-2015
Iran’s new oil and gas contracts will have flexible terms that take into account oil price fluctuations and investment risks, a senior Iranian official told Reuters Saturday, in the most detailed description yet of Iran’s new contract design.
Iran will unveil the new contract model, termed the Iran Petroleum Contract (IPC), at conferences in Tehran November 28-29 and in London in February.
“What we are offering is a very flexible model of contracts. It has integrated exploration, development, production—all those terms,” Mehdi Hosseini, head of Iran’s oil and gas contracts restructuring committee, told Reuters.
“The fee per barrel that is paid as profit to the company is flexible, based on the risk which is considered…. Higher risk, higher reward. Lower risk, lower reward,” he said in an interview. “Anything will be adjusted, depending on the different stages of the operations.”
Iran will offer foreign firms 52 oil and gas projects, including around 20 for exploration, he said.
The contracts last for 20 years and “in some special cases it could also be extended to 25 years,” he said, not including the period or exploration.
“We are offering some projects in the Caspian Sea and also very low-risk areas in the Persian Gulf,” he said.
Hosseini said there have been consultations with oil companies about the terms of new contracts. He said the new contracts will have no ceiling on capital expenditures (capex), money invested by a company in fixed, physical, non-consumable assets, such as buildings and equipment. Capex limits were one of the main points raised by some oil companies as a disadvantage in the “buy-back” contracts Iran had offered in the past.
“Everything depends on the behavior of the fields, and the period of time. If things change, then they [oil companies] would have the chance annually in the annual work program and budget to revise the scope of the work, maybe revise the cost. We are very open,” he said.
At the upcoming contracts conference in Tehran, the details of the offers will be discussed further.
The new contracts will be awarded either through bidding rounds or direct negotiations, Hosseini said.