Iran probably will use European banks to handle some payments for its crude exports once a deal with world powers relating to the nation’s nuclear program starts, said a deputy oil minister from the Islamic Republic.
“The arrangement is that it will be four to five banks and there certainly will be European banks too,” Ali Majedi, deputy oil minister for international and commercial affairs, said in an interview in Tehran Thursday.
Europe, the U.S. and other nations agreed last month to ease measures targeting Iran’s oil exports in return for curbing its nuclear program. The country probably will use banks in Europe and Asia to handle income from crude sales and to pay countries supplying goods, Majedi said. The EU said when the agreement was reached that some financial restrictions could be relaxed for humanitarian purposes.
Iran’s oil exports, the country’s largest foreign-currency earner, plunged last year as U.S. and European Union sanctions cut off banks’ and insurers’ ability to handle Iranian oil sales. The ability of nations including China, Japan and India to use European banks depends on the final details of the November accord, Majedi said.
The measures being discussed would prevent oil exports from rising to more than about 1 million barrels a day, offering Iran about $7 billion in other relief and access to $4.2 billion in oil revenue frozen in foreign banks, according to a Nov. 23 White House statement. The accord leaves most other banking and financial measures that hampered crude exports in place.
Iran and the six world powers it signed the accord with are still working on the details of the trade and financial restrictions that will be eased, Majedi said.
Iranian officials are talking with European oil companies about projects that could start once sanctions are lifted and are developing contract terms to attract investment.
Oil Minister Bijan Namdar Zanganeh met the heads of Vitol Group, Eni SpA and OMV AG, as well as officials from Royal Dutch Shell PLC, while he was in Vienna for a conference of the Organization of Petroleum Exporting Countries earlier this month. Iranian officials are planning to speak to more international companies in London in March, he said.
Iran plans to present model production contracts to international oil companies in April, Majedi said. An Iranian committee is comparing contractual terms used elsewhere in the Gulf region to “get ideas of what we think is competitive and attractive,” he said.
“We are comparing them all to eventually come up with a new contract model, which will probably be a service contract, but with more benefits,” Majedi said. He didn’t provide further details.
Under service contracts, companies invest to start or increase output at an oil field and are generally paid a fee for each barrel of oil they produce once they’ve repaid development costs. Zanganeh said Dec. 5 the country would consider production-sharing agreements for the Caspian Sea, which give companies a stake in the barrels pumped at a field and allow them to account for oil in the deposit as reserves.
Iran is exporting about 1 million barrels a day and may ship about 1.1 million barrels of crude a day and 300,000 barrels of condensate, a lighter grade of oil, in the Iranian year starting in March, the oil ministry said in a statement on its website Dec. 3.
The country can produce as much as 3.5 million barrels of crude a day and could reach that level within about a year of sanctions being lifted, Majedi said.
Iran would seek to pump about 4 million barrels, possibly with the help of international companies, he said.