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Iran plans higher pay for riskier oil fields with new contracts
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File - An aerial view shows the third gas refinery of South Pars gas field in Assalouyeh, Iran on the northern coast of the Persian Gulf, Jan. 27, 2011. (AP Photo/Vahid Salemi)
File - An aerial view shows the third gas refinery of South Pars gas field in Assalouyeh, Iran on the northern coast of the Persian Gulf, Jan. 27, 2011. (AP Photo/Vahid Salemi)
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DUBAI: Iran will offer foreign partners incentives to find and pump more crude and natural gas and will pay some fees in barrels as it seeks to boost income once international sanctions are lifted.

New contracts that the country is developing will offer higher fees for riskier exploration and production projects, Oil Ministry officials said at a conference in Tehran Sunday. Local and international executives are attending the two-day meeting that started Saturday to discuss rules that would govern oil and gas production if Western curbs on Iranian energy exports are removed. The committee revising Iran’s contract model presented new terms called the “ Iran Petroleum Contract.”

“We’ve analyzed all the contracts in the market right now, all available, beneficial models, and this is what we’ve come up with,” Mehdi Hosseini, a government energy adviser who leads the ministry committee, said at the conference. “This is a good model, with flexibility.”

Iran, a member of the Organization of Petroleum Exporting Countries, is discussing limits to its nuclear program in exchange for lifting Western sanctions on its financial and energy industries. It agreed with six world powers on Feb. 20 to start talks next month that may achieve a long-term nuclear accord before a six-month interim deal expires. The U.S. and its allies believe Iran may be seeking to develop atomic-weapons technology, a claim that Iran denies.

Under the proposed terms, state-run National Iranian Oil Co. will form joint ventures for crude and gas production with international companies to manage projects, provide financing and maximize hydrocarbon recovery, Hosseini said. Partners conducting exploration projects will be paid for their work with a share of the output, according to presentations at the conference.

“Ownership of the reservoirs belongs to the people, so ownership is never possible to be transferred,” Hosseini said. “The ownership of the produced oil can be negotiated,” he said, adding that the government wanted to offer contracts that would help develop long-term relationships with partners.

International firms will act as the sole operator at oil and gas exploration blocks and will be responsible for the risks of those projects. NIOC, as the state firm is known, may be a technical partner in the developments.

Fees paid to international firms will be ties to oil’s price and determined on a sliding scale, with riskier developments paying more, Hosseini said. Iran is giving priority to investment in common fields shared with neighboring states such as Iraq and Qatar, and work on those deposits will be remunerated at the higher rate. The contracts will include incentives for extending the life of fields and the recovery rate for oil and gas.

Future partners will be able to recover all development costs linked to exploration and the start of production. They will be offered exploration rights in nearby areas if they find no oil or gas in a block where they’ve been working.

Iran is seeking to gain technical expertise by joining foreign companies in the projects and will require training for local nationals to boost local capabilities in the industry.

 
A version of this article appeared in the print edition of The Daily Star on February 24, 2014, on page 5.
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Story Summary
Iran will offer foreign partners incentives to find and pump more crude and natural gas and will pay some fees in barrels as it seeks to boost income once international sanctions are lifted.

The committee revising Iran's contract model presented new terms called the "Iran Petroleum Contract".

The U.S. and its allies believe Iran may be seeking to develop atomic-weapons technology, a claim that Iran denies.

The contracts will include incentives for extending the life of fields and the recovery rate for oil and gas.
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