December 06-2013
Iran is preparing for an end to sanctions by planning to offer more lucrative contracts to foreign firms that invest in developing Iran’s oilfields, the Financial Times of London HAS reported.
Mehdi Hosseini, an adviser to Iran’s oil minister, was quoted in the article as saying the Islamic Republic would scrap its current system of “buyback” contracts, which do not allow foreign companies to book reserves or take equity stakes in Iranian projects.
The buyback system treats the foreign oil firm developing a field as simply a contractor paid for his services, but with no investment or ownership rights. The buyback system has been very unpopular with international oil firms.
According to the Financial Times, Hosseini said a new “win-win” type of contract, details of which are expected to be announced in London next March, was in the works and leading companies could benefit, “whether American or European.”
There have been rumors for months that Iran, even before the election, was preparing to give selected firms some ownership rights in fields they develop. However, one issue in the revolution of 1979 was to deny foreigners any ownership rights and the Constitution therefore bans such arrangements.
An alternative known to have been under discussion in Iran is to maintain the basic buyback contract but to a) loosen the tight controls that contractors object to and b) allow a much higher return on investment than currently.