|
 Tehran is engaged in talks with world powers about its disputed
nuclear program as it tries to strike a final deal to lift the
sanctions that have halved its oil exports to just over 1 million
barrels per day since 2012 and hammered its economy.
To prepare for any agreement, it has already circulated new draft
oil contracts to foreign firms to attract business once the
restrictions end, Iranian oil officials and Western diplomatic
sources said. Such deals would involve helping Iran revive aging
fields and develop new ones, they added.
But there is no certainty about the outcome of the nuclear
negotiations. The contracts offer far more favorable terms than
those offered pre-sanctions as many companies would be hesitant to
sign even a preliminary deal which U.S. and European governments
could regard as jumping the gun.
Companies may also require greater persuasion to invest in Iranian
fields due to low crude prices, which have more than halved since
June, and the turbulent relationship Iran has had with foreign firms
in the past, especially after the 1979 Islamic revolution.
"The new contract is more competitive than other oil producers. It
provides higher potential profits and lower investment risks," said
a senior Iranian oil ministry official who declined to be named due
to the sensitivity of the matter. The contract offered a favorable
rate of return and joint venture options with local Iranian firms,
he added.
 The new contracts will offer long-term durations of up to 25 years,
oil officials say.
A spokesman for Iran's oil ministry declined to comment on the
nature of the contracts.
Previously, foreign investors have only been involved in exploration
and development of oil fields. They operated under buy-back
contracts, whereby they were paid a fixed rate of return and did not
own the assets and were contractors without rights to the fields.
Analysts and industry sources said companies had failed to cover
their costs under this mechanism, which offered no long-term
guarantees of income.
The situation has changed, however. President Hassan Rouhani, who
won power in 2013 with pledges to improve the economy, is seeking to
end a malaise that has seen prices of food, water and electricity
rise beyond the reach of many Iranians as high unemployment and low
wages take their toll.
CONTROL
The new oil contracts will allow investors to be involved in
production, giving them far greater control and certainty over
long-term revenue in a country where foreign ownership of oil
resources is banned.
"The Iranian petroleum contracts are more relaxed to encourage major
investors ... For example in previous contracts, the commerciality
was decided by an Iranian committee but under the new contracts it
has been changed in a way to accommodate the foreign party," the oil
ministry official said.
Another oil ministry official said: "The major incentive for an
international oil company (IOC) is the possibility to book the
reserves, something that was not possible in the past ... One of the
terms (on offer) is the long-term joint venture between the IOC and
the Iranian operator."
"The investors will have no rights over the reserves but ... after
exploration is completed, they can report output they receive as
payment," the official added.
Iran's Oil Minister Bijan Zanganeh has met with Western oil
executives at recent OPEC meetings in Vienna, including Italy's Eni,
Royal Dutch Shell and Austrian oil and gas group OMV.
Iranian sources declined to identify which companies had seen the
draft oil contracts. There has been oil industry speculation that
Shell and ConocoPhillips could be among parties to have been
courted.
Shell declined to comment. ConocoPhillips said it acted in full
compliance with U.S. law and was "not engaged in business dealings
with Iran".
[to top of second column] |
One Western diplomatic source said the interest in oil dialogue with
foreign companies was "one-sided and mostly coming from Iran's
side". "Iran is looking a lot less interesting and desirable from
the perspective of Western oil companies. There's too much oil on
the market so the last thing they want is for Iran to come back
on-line," the source said.
Another Western diplomatic source said: "There are still great
doubts on profitability at the moment given the lack of direct
access to fields in Iran. It is unlikely that any oil company - in
the current uncertain environment - would sign even an open
contract. It is very much wait and see."
'WRONG SIGNAL'
The new contracts, which include those in the upstream - exploration
and development - sectors are expected to attract more than $40
billion in foreign investment, Iranian media have recently quoted
officials as saying.
Iran has postponed a planned oil conference in London, which was due
to have taken place in February to reveal its new contracts, until
November. An Iranian official said "the U.S. urged Tehran to hold
off" until a final nuclear deal was penned.
Washington has reiterated it continues to enforce sanctions.
Iran and six world powers are trying to meet a self-imposed deadline
of the end of June to resolve the nuclear standoff over Iran's
nuclear work, which the West fears is aimed at developing a weapons
capability - a charge Iran denies, saying it is for peaceful,
civilian purposes.
When contacted, a British Foreign Office spokesman said the
government did not support the London oil conference.
"It would be premature in the absence of a comprehensive nuclear
deal," the spokesman said, adding that encouraging trade with Iran
"would send the wrong signal".
"The UK government does not encourage trade with Iran. Until we have
a nuclear agreement that fully restores international confidence in
the nature of Iran's nuclear activity it will be necessary to
maintain consistent pressure on Iran through sanctions," he said.
Analysts say Iran is still not open for business.
Mehdi Varzi, a former official at the state-run National Iranian Oil
Co, said discussions with foreign oil companies had been "on and off
for some time", adding that Iran had to offer more attractive
incentives to get the ball rolling.
"With the current situation, even if sanctions are lifted, I cannot
see many companies going to Iran," said Varzi, who now runs an
energy consultancy in Britain, adding that Iran's energy sector
would be in deep trouble if market conditions deteriorated further.
"If things get worse, the survival of the Iranian oil and gas
industry is at stake."
(Additional reporting by Louis Charbonneau in New York; Editing by
Pravin Char)
[© 2015 Thomson Reuters. All rights
reserved.]
Copyright 2015 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed. |
