From the early days of clinching the nuclear deal, a large number of directors of international companies active in oil industry have traveled to Tehran along with their respective country's economic delegations and voiced their willingness to resume the ties cut-off for years.
Now, months after the deal went into effect in January, the US continued to maintain some sanctions on Iran, scaring off companies from resuming trade with the country and consequently some international banks still shy away from financing trade deals and processing transactions with the Islamic Republic fearing American penalties.
Thanks to new model of oil contracts, dubbed as the Iran Petroleum Contract (IPC) which aimed at attracting foreign companies and investments in Iran’s oil and gas development projects, a large number of officials of the most reputable European oil companies, Total SA of France, the world's fourth major oil company, and Royal Dutch Shell, the Anglo-Dutch firm in particular, have so far held talks with Iranian side aimed at amending mutual cooperation.
IPC Endorsement
On Sept 17, Parliament Speaker Ali Larijani endorsed the new model of oil contracts after a special committee in parliament approved the conformity of terms and conditions of the new contractual framework with Iran’s upstream laws and regulations.
According to media reports, the outlines of IPC, which is aimed at attracting foreign companies and investments in Iran’s oil and gas development projects following years of limited or no cooperation with multinationals and inadequate investment due to the international economic sanctions, were approved by the government in August shortly after it got the backing of so-called Resistance Economy Headquarters, a top government economic advisory body, after some amendments.
A large number of Iranian officials including Head of the Oil Contracts Revision Committee in Ministry of Petroleum Mehdi Hosseini believed that IPC is flexible in nature and any delay in its enforcement will cost the country eight to 10 billion dollars in damage a month.
Hosseini also assumed that speedy investment in projects for development of the oil and gas fields and recovery is essential in order to make up for any backwardness in the joint oil and gas reserves and avoid more violation of rights of Iranian nation.
NPC-Shell MoU
On Oct 9, Royal Dutch Shell inked a memorandum of understanding with Iran’s National Petrochemical Company (NPC) on expanding cooperation in the key petrochemical industry, preparing the ground for the coming back of the Anglo-Dutch firm to the Islamic Republic.
Some Iranian officials hope that the oil giant, which was involved in the development of Iran’s Soroush and Norouz oil fields in Persian Gulf waters, makes preparations for direct investment in Iran.
Director for Investment of NPC Hossein Alimorad expected that the mutual MoU could be focused on the half-finished project of producing natural gas products.
Forced by sanctions to end trade with Iran in 2010, Royal Dutch Shell that was also planning to develop a gas liquefaction project, resumed purchases of Iranian oil in June and took 130,000 tons of Iranian crude in July from the Kharg Island in the Persian Gulf to Europe under a spot contract.
In March, Royal Dutch Shell paid €1.77 billion ($2 billion) it owed the National Iranian Oil Company (NIOC), settling debts after the sanctions removal in mid-January.
NIOC-Total Deal
On Jan 28, French energy giant Total announced that it has signed a Memorandum of Understanding (MoU) with NIOC to have access to the technical data of certain Iranian oil and gas projects to assess their development potentials. The MoU was signed during the visit to Paris by the Iranian President Hassan Rouhani.
The two also signed a framework agreement which will allow Total to take between 150,000 and 200,000 barrels of crude from Iran a day for delivery to French and European refineries.
Several months later, Minister of Petroleum Bijan Zangeneh in a meeting with French Foreign Minister Laurent Fabius who visited Tehran to “revive relations” after the finalization of nuclear talks between Iran and the 5+1 group of countries, said Iran welcomes Total’s return to the resource-rich country amid Tehran's drive to step up oil and gas development projects after the elimination of sanctions.
Zangeneh also added Total which has been present in Iran’s oil projects for more than 20 years and in view of the intent expressed by the French, a new door is supposed to open for the expansion of the company’s activities in developing Iranian oilfields.
Total which ignored the 1996 Iran and Libya Sanctions Act (ILSA) of US Congress to participate in Iran’s energy projects, has so far ran a gas project in Iran from 1995 to 2000 together with Russian and Asian partners to develop Phase 2 and 3 of the South Pars field at a cost of more than $2 billion.
The giant French company also developed Iran’s offshore Balal oilfield along with Italy’s Elf and Canada’s Bow Valley in 1999 in a deal worth $300 million.
A big country and an influential player in energy for enjoying giant oil and gas reserves, Iran, has always been open to foreign investments.
Indubitably, the new contract model unveiled by Iran’s Ministry of Petroleum for investment in its oil and gas sector, is more eye-catching to foreign investments providing longer-term commitment from both sides.