Some Iranians interpret new contracts with IOCs as foreign ownership
International sanctions have been lifted from Iran following the country’s successful implementation of all measures required to start the Joint Comprehensive Plan of Action (JCPOA), but an internal struggle continues in Iran between conservative factions and President Hassan Rouhani’s administration. On Saturday, student protestors aligned with the Basij, a hard-line militia formed to uphold the principles of the Islamic Republic, protested outside Iran’s oil ministry, saying the terms of the new Iranian Petroleum Contracts (IPCs) gives too much to international oil companies (IOCs), reports The Wall Street Journal.
The controversy over the IPCs stems from language in the Iranian Constitution, which prohibits privatization or foreign ownership of the exploration and production sections of the oil industry. The IPCs require that any IOC working in Iran must form a joint venture with an Iranian partner, typically the National Iranian Oil Company (NIOC), with the Iranian party acting as the owner and supervising the planning and operations.
While the new contracts would not technically allow foreign companies to own Iranian natural resource reserves, some have interpreted the IPCs as circumventing the prohibition in the constitution.
New contracts meant to offer greater flexibility – $280 billion in capital projects could land on the table
It was hoped that the final version of the IPC would make Iran an attractive target for foreign investment following the end of sanctions. Estimates for the amount of capital needed to upgrade Iran’s ailing oil and gas industry vary, but a complete revitalization could cost as much as $280 billion.
The old Iranian contracts were often seen as inflexible, and too short-term to be profitable. The new contracts will have a 20-25 year duration, cover more aspects of exploration and development, and offer a more flexible profit structure to the international partner.
Many concerns remain for prospective international oil companies however, as appendices on topics such as crude liftings, accountancy rules or arbitration, have yet to be completed. Oil companies also disagree on whether foreign companies should be required to develop natural gas and how to involve private Iranian companies with little experience managing exploration and production projects.
A conference that was scheduled to be held later this month has also been cancelled, reports The New York Times. Deputy Head of NIOC Ali Kardor was quoted as saying that there was no need for such a conference because bidding by foreign oil companies would be held in May.