What’s Fueling Opposition to Iran’s New Oil Contracts?

By David Ramin Jalilvand, for Al-Monitor. Any opinions expressed are those of the author, and do not necessarily reflect the views of Iran Business News.

Iran’s current buyback scheme, which reduces the role of international partners to that of service providers, has been very unpopular among international oil companies. It has been a major factor in the reduction of investment in the Iranian energy sector.

Upon taking office in August 2013, President Hassan Rouhani vowed to amend the fiscal terms for cooperation with international partners. His efforts led to the November 2015 unveiling of the framework for a new oil contract scheme, the Iran Petroleum Contract (IPC), which aimed to attract investment and technology to Iran’s energy sector.

Making the case for a “win-win” solution, Petroleum Minister Bijan Zanganeh noted that the IPC was designed to meet Iran’s needs while being attractive to international partners.

In contrast to the buyback scheme, the IPC seeks to take into account the concerns of foreign companies. It allows for more flexible remuneration and longer engagements while international companies are also allowed to book oil reserves. At the same time, the IPC is intended to empower the Iranian energy industry as international investors are required to partner with an Iranian counterpart.

Against the backdrop of the IPC announcement and the Jan. 16 Implementation Day of the Joint Comprehensive Plan of Action, which led to the lifting and termination of several energy and financial sanctions, international energy companies have rushed to Tehran. Numerous memoranda of understanding have been signed, including by France’s Total, Germany’s Wintershall and Italy’s ENI.

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