Iran eyes $100 bn of investments in oil industry

I ran is finalising details of new and more lucrative contracts for multinational energy companies as it hopes to secure $100bn of fresh investment in its oil and gas sector once international sanctions are lifted.

Mehdi Hosseini, an adviser to Iran’s oil ministry and the man tasked with drafting the Iran Petroleum Contract expects Hassan Rouhani, the president, to approve the new contract in the coming months, with details to be announced by the end of the year.

The Islamic republic, which has the world’s largest gas reserves and fourth-largest oil reserves, has ambitious plans to increase its oil production capacity to about 5m b/d by the end of the decade and has been working to revise the contracts for almost two years.

Completion of the process would mark a huge change for a regime traditionally wary of foreign ownership of its oil and gas sector.

The nature of the contract remains vague. It will be a service contract, Hosseini said, which will have a “flexible fee”, one that addresses the risks of each project and takes market fluctuations into consideration. Under some circumstances, reserves can be booked, but foreign companies will not be able to own oilfields, he said without giving further details.

Oil majors such as France’s Total, Shell, Eni and Norway’s Statoil — which have been invested in Iran since the late 1990s despite sanctions — have refused to develop more fields because of the low rate of return under the buyback contracts and Iran’s failure to cover unexpected cost overruns.

Even as companies welcome any overhaul to the contracts, many still voice caution. “If anyone thinks negotiating with Iran over oil projects is easier than nuclear negotiations is completely wrong,” said a western oil consultant in Tehran.