Iran to Pay Oil Companies Larger Fees in 20-Year Contracts

(Bloomberg) -- Iran will pay foreign oil companies larger fees than it did under previous buy-back contracts to attract $100 billion of investments needed to rebuild its energy industry.

The Persian Gulf state, once OPEC’s second-largest crude producer, will also offer 20-year contracts on oil and natural gas projects, Roknoddin Javadi, managing director of state-run National Iranian Oil Co., said in an interview in Tehran.

“What’s been announced so far looks like an attractive contract -- no doubt it’s a vast improvement on the buy-back contracts,’’ said Robin Mills, a Dubai-based consultant who worked formerly for Royal Dutch Shell Plc on projects in Iran from 1998 to 2003.

Iran, holder of the fourth-largest reserves of oil, is preparing to boost its output once world powers remove economic sanctions that choked off investment in its oil and gas industry. Oil exports fell to an average 1.4 million barrels a day last year from 2.6 million in 2011, U.S. Energy Information Administration data show.

New Contract

New contract terms will be introduced next month, as part of plans to boost oil production to 5.7 million barrels a day and gas output to 1.4 billion cubic meters a day by 2021, Javadi said.

“The new contract that we’re going to present has raised the opportunity for those who invest to be able to participate in operation and production for a long term, let’s say 20 years,” he said. “This is the major incentive.”

Russian Energy Minister Alexander Novak was leading a trade delegation to Tehran on Wednesday, the Tehran Times reported, without citing anyone. Delegates were to meet with Oil Minister Bijan Namdar Zanganeh and other Iranian officials to discuss cooperation in the oil industry and power projects.


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Copyright 2016 Bloomberg News.

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