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Iran looks to amend model contract for oil deals

Iran has asked for input on possible revisions to a model contract for oil deals, Le Figaro has reported.02 Jun 2016

First vice president Es-hagh Jahanguiri has asked for changes to be made to the model contract for oil and gas projects. The contract was presented to overseas companies in November 2015 but has attracted criticism, Le Figaro reported, citing a government website (link in French).

The new Iran Petroleum Contract (IPC) was designed to replace the previous "buy back" contract used before sanctions were imposed on Iran. Under the buy back contract, a foreign firm developed an oil or gas field but an Iranian company then took over production, said infrastructure expert Peter Rosher of Pinsent Masons, the law firm behind Out-Law.com.  

The IPC instead creates joint ventures, with international companies earning a share of total output, Rosher said. The Iranian partner in a joint venture must have a majority stake of at least 51%.

However, the contract has raised concerns among some conservative groups within Iran who say that it gives too much power to international companies, Rosher said.

"The original buy back scheme was unpopular with international partners, so the IPC seemed a good step forward. With Iran due to ramp up oil production, international companies will be anxious to resolve any issues with the IPC and get contracts signed," Rosher said.

At the launch of the model contract At the time, Zanganeh said it was "not perfect or ideal, but an effective and responsive model for both sides", according to Le Figaro.

He said Iran hoped to attract $25 billion in oil and gas investment using the contract after international sanctions were lifted in January, Le Figaro reported.

The lifting of economic sanctions against Iran is expected to add 600,000 barrels per day to the oil market by the middle of 2016 and the oil market could consequently "drown in oversupply", the International Energy Agency said in January.