February 19, 2016
Opposition from hardliners is still holding up approval of the contract model the Oil Ministry wants to use to attract foreign investment to the country.
As a result, a conference scheduled to be held this month in London to unveil the contract has been canceled. The Oil Ministry said it still plans to open dozens of oilfields to bidding in May by foreign oil majors, but none of those firms have the contract documents because the hardliners have stonewalled.
The new Iran Petroleum Contract (IPC) was drafted and approved by the Oil Ministry a year ago. The cabinet did not approve it until a few months ago, and there was no explanation for the long delay. It isn’t clear who exactly is holding it up now, but the problem appears to be centered on hardliners in the Majlis, which must approve contracts with foreigners under the Iranian Constitution.
The contract impasse may be resolved February 26, Election Day, if the hardliners are swept away. But, if they retain control, they could be expected to double down on their opposition. That could stop all plans to put oilfield development up for bid and bring the government’s development plans to a grinding halt.
Iran held a conference on the IPC in Tehran in November. But it didn’t actually release the IPC documents. It said it would do that at a London conference scheduled for February 22-24.
Then last month it said it had to cancel the London conference because the people it wanted to send from the Oil Ministry to the conference couldn’t get visas. That explanation didn’t pass the smell test. It is true that the newly reopened British Embassy in Tehran is not yet issuing visas. But plenty of Iranians fly to Ankara and get UK visas there in a few days.
Reuters quoted foreign oil executives as saying fac-tionalized politics in Tehran appeared to be the real reason for the conference cancellation.
The conference had been postponed previously five times as the negiotiations over the nuclear deal dragged on. However, this time domestic infighting over the structure of the oil and gas contract model is the problem.
“There are big internal clashes on the new contract,” said a senior foreign oil executive. “The Iranians have not presented us with a final contract until now; nothing was finally approved.”
The Iran Petroleum Contract is to be used for 52 projects to be put up for bid, Iranian officials said months ago.
BP, France’s Total, Italy’s Eni and Russia’s Lukoil were among 135 firms that attended the Tehran conference in November to hear about the IPC. But executives expecting to see the model of the contract were offered only data on the fields up for investment and some general presentations about what the new deals might look like.
“It was clear that this conference was only for a domestic audience. I do not think they even approved the contract yet,” said a foreign oil executive who attended the November conference.
Hardliners have strongly opposed the new contract model, saying it contradicts the constitutional bar on natural resources being owned by foreigners. Some have called the new contract model “treason.”
Hardline students gathered last week in front of the Oil Ministry to protest against the terms of the contract model.