Iran’s new oil minister has ordered the revision of energy project contracts to make them more attractive to foreign investors, a National Iranian Oil Company (NIOC) executive told oil ministry news service Shana.
Iran’s long insistence on paying contractors with oil made projects unattractive to foreign investors long before Western sanctions made it almost impossible to work in the isolated Islamic republic.
Tehran began offering more attractive production sharing contracts (PSCs) to some Indian companies earlier this year in the hope they would help revive its decaying energy sector.
Oil Minister Bijan Zanganeh has ordered a wider review of Iran’s oil contracts because the buy-back deals are particularly unsuitable for the enhanced oil recovery projects NIOC needs to attract investors to revive its ageing oil fields.
“The petroleum minister has issued a specific order for following up on reforming the structure of oil contracts in the country in order to invite all well-known domestic and foreign oil companies for maximizing national interests,” NIOC’s planning director, Abdul-Mohammad Delparish, said.
“Currently, production sharing agreements are not the priority in the petroleum industry and the focus is on other types of contracts like buy-back,” Shana quoted him as saying.
Delparish said Iranian oil officials were consulting with foreign industry experts about how to make the contracts more attractive for foreign investors.
Under Iran’s buy-back system, contractors are supposed to be paid in oil and gas from projects they develop with their own capital but then have to hand back the project to Iranian companies when completed and wait to be paid.
This system has kept oil majors like Italy’s Eni waiting for multi-million dollar payments for projects they completed decades ago, while sanctions make it still more difficult to get the oil from Iran.