- Lawmakers likely to be mindful of ‘missed opportunities’ in Iraq and Lebanon, say legal experts
The global oil industry is gearing up for an overhaul of Iranian oil contracts next week, in a move which legal experts say will influence oil major investment plans in Iran ahead of the lifting of sanctions.
Oil and gas experts at international law firm Pinsent Masons say revamped contracts, expected to be unveiled at the Tehran Oil Conference in Tehran on 28 November, will be a critical step for developers hoping to re-enter Iran after years of trade sanctions.
While majors and various reformists in Iran are hopeful new contracts will conform to modern global standards by following a fiscally beneficial contemporary production sharing model, all eyes are on Tehran to see whether it will adopt a more traditional, but less attractive, contractual model widely-used in Iran prior to sanctions.
UAE-based Oil and gas expert at Pinsent Masons, Jason Rosychuk, said: "Developers eyeing Iran are in a state of limbo as they wait for this essential news. There's no doubt that if we see a return to old-style Iranian oil contracts, with shorter life cycles and a far tighter control on ownership of reserves and profits, oil majors will be cautious about how much they plan to invest should sanctions be lifted as planned. “
“The political tussle between Iran's traditional insular elements and those seeking to embrace global markets is being played out through this decision. All eyes will be on the leaders of Iran next week waiting to see if the old guard or the reformists have succeeded. The outcome will shape the future of the hydrocarbons in Iran but also send a signal to the industry.”
Rosychuk added that Iranian leaders will be mindful of the experiences of Iraq and Lebanon which have both suffered a lack of international investment as contractual incentives have not been enough to offset risks posed by widespread political instability.
Oil and gas experts at international law firm Pinsent Masons say revamped contracts, expected to be unveiled at the Tehran Oil Conference in Tehran on 28 November, will be a critical step for developers hoping to re-enter Iran after years of trade sanctions.
While majors and various reformists in Iran are hopeful new contracts will conform to modern global standards by following a fiscally beneficial contemporary production sharing model, all eyes are on Tehran to see whether it will adopt a more traditional, but less attractive, contractual model widely-used in Iran prior to sanctions.
UAE-based Oil and gas expert at Pinsent Masons, Jason Rosychuk, said: "Developers eyeing Iran are in a state of limbo as they wait for this essential news. There's no doubt that if we see a return to old-style Iranian oil contracts, with shorter life cycles and a far tighter control on ownership of reserves and profits, oil majors will be cautious about how much they plan to invest should sanctions be lifted as planned. “
“The political tussle between Iran's traditional insular elements and those seeking to embrace global markets is being played out through this decision. All eyes will be on the leaders of Iran next week waiting to see if the old guard or the reformists have succeeded. The outcome will shape the future of the hydrocarbons in Iran but also send a signal to the industry.”
Rosychuk added that Iranian leaders will be mindful of the experiences of Iraq and Lebanon which have both suffered a lack of international investment as contractual incentives have not been enough to offset risks posed by widespread political instability.
“It’s not been an easy road for either country because the international oil community felt the risk/reward was not weighted appropriately,” he said.
Implementation of the nuclear agreement between Iran and the so-called P5+1 countries - the five permanent members of the UN Security Council plus Germany – is expected early next year.
Rosychuk said: “Preparation is of course key and it’s understandable that oil and gas companies want to be ready. But there is a need not to jump the gun. Nothing is set in stone and any business needs to be confident that they are not breaking the law or contravening strict sanctions by engaging in talks and making agreements at this point.
“Businesses must be sure that any exploratory talks involve meticulous due diligence of third parties and agents to minimise bribery and corruption risk and ensure post-sanctions investments are well placed and beneficial.”
