New Petroleum Contracts Producing more than Oil

Of note, oil and gas reservoirs are considered to be mines. In this vein, critics of the new oil contract terms claim that future agreements will transfer ownership of anfal to foreign companies, either through giving them oil and gas or via excessive payments.

To ascertain the validity of these arguments, it is necessary to take a closer look at the general terms of the Iran Petroleum Contract.

First, the Iran Petroleum Contract is not a production sharing agreement because it does not create any right of ownership of reservoirs for foreigners. In fact, the contract is a “buy-back” or “service contract” that offers more incentives to foreign contractors than previous agreements. According to the contract’s Article 3, Section 1, Iran’s right of ownership of oil and natural gas fields and reservoirs, which is managed through the Oil Ministry, should be respected. Article 11, Section 5 also clearly states that any produced commodity is the property of the Oil Ministry.

Second, in addition to being the sole owner of the reservoirs, the Oil Ministry is also the owner of the contractor’s assets. Moreover, all contractor operations are under the supervision of the Oil Ministry. In other words, the contractor is a mediatory vessel through which the Oil Ministry conveys its right of ownership. Thus, the Iran Petroleum Contract is not in violation of Article 44 of the Iranian Constitution because even during the operational phases, the government remains the owner of major industries, which include all contractor operations, assets and the extracted commodities.

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