Cabinet Approves New Oil Contract Model

An amended draft of Iran’s new model for oil and gas contracts was approved by the government on Wednesday.

At a cabinet meeting in Tehran on Wednesday, the Iranian administration gave its final approval to the draft titled “General Conditions, Structure and Patterns of Upstream Oil and Gas Contracts” after it underwent over 150 minor and major changes.

The new amendments were endorsed after Leader of the Islamic Revolution Ayatollah Seyed Ali Khamenei stressed last month that no new oil and gas contracts for international companies would be awarded without necessary reforms.

The rights, commitments and responsibilities of all parties in areas such as accounting and auditing, method of financial payment or repayment, technical inspection and maintenance should be clearly specified in the new contracts.

The contracts should also include details on production measurement methods, human resources training, health, safety and environment, imports and exports, insurance, terms of contract termination, force majeure and dispute settlements.

During the Wednesday meeting, the oil ministry was tasked with approving an overview of the contracts including the agreed price, duration and other general conditions.

The new oil and investment contract for international firms, known as the Iran Petroleum Contract (IPC), will replace Iran’s buyback oil deals. Under a buyback deal, the host government agrees to pay the contractor an agreed price for all volumes of hydrocarbons the contractor produces.

Iran worked on the oil contract model for two years. The country hopes to draw as much as $50 billion a year from major oil companies such as Italy’s Eni SpA and France’s Total to develop its oil and gas fields.

(Source: Tasnim, under Creative Commons licence)

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