Iran Approves New Oil and Gas Contracts

Iranian officials on Tuesday approved the new Iran Petroleum Contract (IPC) deal after numerous delays between hardliners and more moderate elements of the government.

As reported by the Iranian state media and mentioned by Reuters, the chief government economic advisory body (the Resistance Economy Headquarters) gave the go-ahead for the IPC including several amendments.

One of the main sticking points of the new gas and oil contracts corresponded to the buyback system where foreign firms are barred from booking reserves or taking equity stakes in local companies.

President Hassan Rouhani resisted calls to end the buyback system that has been in place for more than twenty years. Supreme Leader Ayatollah Ali Khamenei, who has opposed Rouhani on issues such as a historic nuclear power deal, claimed earlier this month that no new gas and oil contracts would be added unless necessary reforms were incorporated.

The Resistance Economy Headquarters was formed last year in order to implement Khamenei's economic views. The government must approve the final draft of the IPC package though the first set of contracts is expected to be signed this September.

The new contracts are crucial for an Iranian energy industry seeking to expand following the removal of international sanctions last January. Oil accounts for less than 15 percent of government revenue and around 1.4 million barrels of oil per day (bpd) were exported in 2015. Yet Iran is currently exporting 2.6 million bpd, and Deputy Petroleum Minister for International Affairs and Trading Amir Hossein Zamaninia recently estimated that US$40 billion to US$50 billion of investments would be made in the Iranian oil industry this year.

By Erwin Cifuentes for Oilprice.com

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