å
π
Iranian Petroleum Contract
Energy PioneersIran Oil and Gas Monitor
Last Updated: September 2014
Iran Petroleum Contract
Energy PioneersIran Oil and Gas Monitor
ww
w.energypioneersltd.com
Iranian Oil and G
as Monitor
IPC
1
11
Disclaimer: All information contained in this publication is English translation of retrievals of publicly available sources, believed to be accurate and reliable at the time of publishing. Energy Pioneers Ltd. accepts no liability whatsoever for any loss or damage resulting from errors, inaccuracies or omissions affecting any part of the publication.
The Iranian upstream contractual framework: IPCs general terms and structure
After many upheavals, political oppositions and amendments, the general terms and structure of
the Iranian upstream oil and gas contractual framework was ratified in September 2016, and the
government subsequently announced it plans to hold the first round of tenders under this
framework in November 2016.
Since their initial launch in November 2015, and as a result of acute opposition by conservative
groups to some of its terms, the contracts underwent numerous rounds of revisions and
modifications which at some point were also demanded by the country’s Supreme Leader,
Ayatollah Khamenei.
The general terms, as approved by the Cabinet under 3 Resolutions, involve many uncertainties
over how exactly such terms could be embedded in a final draft contract in order to fulfil the
objectives of both sides; i.e. enforcement of the state’s sovereign right and complete ownership of
oil and gas reserves by the nation, transfer of technology and empowering the Iranian companies
(demanded by the Iranian side) and a low-risk, profitable and stable operation in Iran (long-aspired
by foreign companies).
While there seem to be a relatively long way to see the exact terms of IPCs, it is likely that the
drafting and finalisation of such terms will take place through bi-lateral negotiations with the very
first bidding parties. It is important, however, to remain reasonably optimistic that despite all the
hurdles, a major step has been taken forward to both maximise the country’s massive potential and
also address concerns of participating oil companies at the current dark days of international oil
markets. Constructive contributions from experienced and competent experts from within and
outside the government could facilitate the transition process for the Iranian oil industry from an
underdeveloped, isolated sector to an advanced, dynamic and interactive one.
September 2016
Energy PioneersIran Oil and Gas Monitor
ww
w.energypioneersltd.com
Iranian Oil and G
as Monitor
IPC
2
A) IPCs resolutions
There are 3 resolutions approved by the government with regards to IPCs (Resolution No. 52445D/
104089Y of November 2, 2015; Resolution No. 53376 D/57225Y of August 6, 2016 and Resolution
No. 53421D/69978Y of August 31, 2016).
The first Resolution, which had set out the preliminary terms of the IPCs, was severely opposed to
by the critiques. As a result it was replaced by the second resolution of the Cabinet Minister ratified
in early August 2016 (See full text of the 2nd Resolution in Section B below). The second resolution
encompassed provisions and policies regarding the country’s oil and gas sector, as enacted in the
Economy of Resistance Policies and the 6th Five-Year Development Plans approved by the Supreme
Leader.
The terms of the 2nd Resolution were, however, further modified under a 3rd Resolution within less
than 2 weeks from the ratification of the 2nd one to fully address and incorporate the concerns of the
critiques and opposition groups. The 3rd Resolution gave birth to the final structure under which
IPCs are planned to be offered to local and foreign oil and gas companies (See full text of the 3rd
Resolution in Section C below).
B) 2nd Resolution: The general terms, structure and model of upstream oil and gas contracts
Article 1: The following terms used in this Resolution shall be interpreted according to the
definitions provided in this Resolution and other terms that are not defined in this Resolution shall
follow the definitions adopted in the Petroleum Law -1986 (amended in Oil Law Reform in 2011),
and definitions adopted by and subject to Iranian laws and regulations, as well as definitions and
terms adopted within the international oil industry, applicable laws to the petroleum contracts, as
well as the Constitution of the Islamic Republic of Iran.
A) General terms: principles and general terms and structures governing upstream contracts
B) Oil: Hydrocarbons in form of crude oil, condensate, natural gas, natural bitumen, oil sand and
rocks discovered in natural conditions or through upstream operations.
C) Oil and Gas Field: Any field or reserves, underground or surface within the geographical
divisions of the country or inland waters, coastal, offshore and international waters, adjacent to the
country borders, that are likely to have oil, and its technical specifications and geographical
September 2016
Energy PioneersIran Oil and Gas Monitor
ww
w.energypioneersltd.com
Iranian Oil and G
as Monitor
IPC
3
coordinates determined and logged by the Ministry of Petroleum.
D) Commercial field or reservoir: a field or reservoir, which through compliance with optimal
production regulations and current economic conditions and operating methods, to be capable of
producing oil with enough net income to cover the direct and indirect expenditures of operation and
foreseeable expenditures for exploration, development and operation, as well as the ability to cover
remunerations and profit of the second party, and other external expenditures accumulated during
the timeframe of the contract, and is expected to produce revenues for each of the contracting
parties, (operate cost-effectively) and generate enough revenues.
E) Green field: An oil or gas field discovered by the National Iranian Oil Company or by other
companies for the National Iranian Oil Company (NIOC), which is ready to enter the development
stage.
F) Brown field: An oil or gas field that has already proceeded to operation and production stage.
G) Reservoir: Any subsurface rock formations or anticlines, containing natural accumulations of
movable hydrocarbons that is confined by impermeable rock and characterised by independent
pressure system.
H) Brown reservoir: Reservoir with history of commercial hydrocarbon production.
I) Green reservoir: Discovered Reservoir from which, to date, no hydrocarbons has been
commercially produced
J) First party to the Contract: NIOC or any of its subsidiaries as the representative of the
company, which are also referred to as “Employer/Client” in this Resolution.
K) Second party to the contract: The company or companies qualified as petroleum specialists for
performing either one or all of the following, including exploration, characterisation, development
and operation and implementation of enhanced recovery projects, stipulated with condition of
providing all of the required financial resources, selected through relevant legal process, and have
signed the contract. Second party to the Contract is also referred to as “the Contractor” in this
Resolution.
L) Exploration block: A defined geographical area for oil exploration activity specified by NIOC
September 2016
Energy PioneersIran Oil and Gas Monitor
ww
w.energypioneersltd.com
Iranian Oil and G
as Monitor
IPC
4
and approved by the Ministry of Petroleum, and specified in the contract for the second party/
contractor to undertake exploration of commercial field or reservoirs.
M) Minimum exploration obligation: This includes variety of operations such as geological
surveys, gravity surveys, seismic studies, drilling and reservoir evaluation intended for discovery of
commercial fields and reservoirs, with the minimum expenditures and specific period provided in
the contract to which the second party of has committed to.
N) Development plan: Development plan are negotiated and approved by the parties tp the
contract, outlining the development of green fields or reservoirs or for increasing production of
brown fields or green reservoirs by conducting enhanced recovery projects, with the possibility of it
being reviewed during the development or production process according to the new findings on the
actual behavior of the fields or reservoirs.
O) Initial production: The defined production capacity to be achieved in the first stage of
operation of the development of green field/reservoirs as agreed in the Development Plan by parties
to the contract, or the additional output to be achieved in the first stage of enhanced recovery
operations for improving the brown fields/reservoirs, as agreed in the Development Plan by the
parties to the contract.
P) Direct capital expenditures: All of the capital expenditures required for development,
improvement or enhanced recovery of reservoirs, including expenditures for management,
engineering, drilling, construction of necessary surface and subsurface installations for development
of the field, including processing plants, injection, transfer, auxiliary and processing facilities, and
all other related setup units, as well as expenditures for exploration operations for determining the
commerciality of the field, and for maintenance, restoration and renovations of reservoirs and fields
that are in production phase.
Q) Indirect expenditures: Includes costs, such as taxes, duties, customs and social security
insurance, paid to the government, ministries and public institutions, including, municipalities.
Note: Payment of taxes, duties and other types of authorised expenditures, as well as settlement of
payments with stakeholders are contractual obligation of the second party to the contract. The
payments received by authorities are accepted exactly as indirect payments, and as stipulated by this
September 2016
Energy PioneersIran Oil and Gas Monitor
ww
w.energypioneersltd.com
Iranian Oil and G
as Monitor
IPC
5
Resolution, the second party to the contract will be reimbursed accordingly.
R) The costs of finance: the costs of finance of the second party to the contract, based on terms
and conditions determined in the contract.
S) Operation costs: All of the ongoing expenses which the second party to the contract, pays for
performing operations, according to the terms stipulated in the contract, as well as based on
accounting standards.
T) Remunerations: A figure proportional to a barrel of crude oil produced additionally (or every
additional thousand standard cubic feet of produced associated gas) from oil field/reservoirs, or
every additional thousand cubic feet of standard natural gas produced from gas fields/reservoirs, or
every additional barrel of condensate gas produced, as the outcome of the performance of the second
party to the contract.
U) Depletion base line: Refers to the line or curve of depletion trend of the field/reservoir with
existing installations and in the event of non-implementation of new initiatives for improving and
enhancing recovery (EOR, EGR, IOR, & IGR), which are agreed upon by the first and second party
of the contract.
Note: The depletion base line must be approved by the Engineering Council of Oil Reservoirs.
Responsibilities, structure and method for appointment of its board of decision-makers are
determined by the recommendation of Petroleum Minister, and approval of Ministers Cabinet.
V) Additional produced oil, gas or condensates: The amount oil, gas or condensates produced
from the green fields or reservoirs, or amount of oil, gas or condensates produced from the brown
fields/reservoirs exceeding the depletion base line.
Note: In an event where enhanced recovery is performed in brownfields, depletion base line can be
the basis for calculating the additional produced condensate gas.
W) Improved recovery rate operation: a combination of operations which would lead to
maintenance of production level or improvement in the recovery rate or acceleration in production
(increase in depletion rate) and could be delayed in all level of production throughout of the lifespan
of a field or reserve (such as complimentary seismic studies, oil and reserves engineering,
geophysics project, 3D or 4D seismic studies, design and execution of projects as new drillings
September 2016
Energy PioneersIran Oil and Gas Monitor
ww
w.energypioneersltd.com
Iranian Oil and G
as Monitor
IPC
6
for sophisticated method for Gas Lift in the field or reserve, fracturing in the reservoir, deployment
of well pumps, improvement in drilling methods and maximum utilisation from horizontal drilling
and so on.
X) Enhanced recovery rate operation:
Enhanced recovery rate of oil: deployment of various up-to-date and advanced technologies in the
world including studies and design of reservoir and operation engineering methods, deployment of
various types of injections in accordance with a field or reserve’s requirement, including injection of
gas, water, steam, chemical, polymers, CO2 and so on. If required, application of complimentary
technologies in each phase and similar technologies which lead to increase in the rate of recovery
and optimizing oil, gas, and condensate production throughout the lifecycle of a field or reserve.
Enhanced gas recovery rate: deployment of various up-to-date and advanced technologies in the
world which would lead to increase or stabilization of the reservoir or field’s pressure and also
maximum shift and as a result leading to increase in rate of gas recovery from the field or reserve.
Y) Contractual area: a geographical area with specific coordinates, which is stipulated in the
contract for execution of the subject of the contract.
Z) Uncapped capital costs: flexibility of the capital costs in relations to the actual behaviour of
the field, the actual market dynamics within the approved annual operation financial plan and also
the requirement for further necessary investment in order to enhance the efficiency and productivity
of the field.
Z.2) Annual operation financial plan: a plan prepared by the second party to the contract and
approved by the second party within the structure of operation projects and the required
amendments and revisions in accordance with the projects’ realities and actual behaviour of the
field. The approval of this plan by the first party to the contract is final and will be communicated to
the second party to the contract. This plan includes details on the costs and required annual
operation for the development and exploitation.
Article 2: the contract subject of this Resolution are divided into 3 categories:
(A) First category: exploration contracts and in an event of a commercial field or reservoir
discovery, the development of the field or the reserves and then exploitation of such a field or
September 2016
Energy PioneersIran Oil and Gas Monitor
ww
w.energypioneersltd.com
IPCIranian O
il and Gas M
onitor
7
or the reserves and then exploitation of such a field or reservoir in such order and during the term
stipulated in the contract. In this category, the assignment of development and exploitation activities,
integrated with the exploration activities, should such activities lead to a commercial discovery of a
field or reserve, is permissible to the second party to the contract, giving due consideration to the
optimal production plans from the oil and gas field. In this contracts category, the minimum
commitments of the bidding company for operation and investment in the exploration area shall be
clearly determined and committed by the second party to the contract.
B) Second category: the development contracts of the fields or discovered reservoir and following
to that, their exploitation in order and during the term stipulated under the contract.
C) Third category: the enhanced or improved oil recovery contracts (EOR/IOR/EGR/IGR) in the
operational fields or reservoir in accordance with the reservoir engineering studies and following to
that, their exploitation in order and during the term stipulated under this contract.
Article 3: In all the contracts signed in accordance with the provisions of this resolution, below
principles will be governing:
A) Enforcement of the right of sovereignty and public ownership of all oil and gas reserves
through the Ministry of Petroleum of the Islamic Republic of Iran.
B) No guarantee by the government and Central Bank of Islamic Republic of Iran and state banks
for commitments made under this contract.
C) Repayments of all direct and indirect expenditure, costs of finance and development costs and
remuneration payment will be done through allocation of a portion of the additional production of a
field (as per provisions of Note C of Article 6) or revenues gained as a result of the execution of the
contract in accordance with the market price of the product and the decision to pay the contractor
through delivery of the field or reservoir’s production or its revenue instead of the product (up to the
termination of the repayment periods/payment of contractor’s claims) is by NIOC.
Article 4: In order to transfer technology and advance national technological capabilities in
upstream oil and gas operations and execute mega projects and enable Iranian companies to operate
in mega domestic projects and participate in regional and international markets, the following points
shall be implemented:
September 2016
Energy PioneersIran Oil and Gas Monitor
ww
w.energypioneersltd.com
IPC
8
Iranian Oil and G
as Monitor
A) In every contract, depending of the circumstance, Iranian Exploration and Production (E&P)
company/companies whose credentials are approved by NIOC in accordance with the terms and
principles stipulated by the Ministry of Petroleum, shall participate as the partner of the competent
foreign company/companies and through their participation in execution of the contract, the
opportunity for transfer and development of technology, enhancement of know-how and managerial
and reservoir engineering skills is provided. The second party to the contract is obliged to submit
plans for transfer and development of technology as a part of its annual operation financial plan. In
every contract, the executive policies and operation measures for fulfillment of the provisions of this
Article shall be annex to the contract as the technology annex.
Note: The second party to the contract is obliged to fulfill the main contract’s provisions related to
transfer and development of technology in its contracts with sub- contractors.
B) The other party to the contract is obliged to maximise the utilisation of the technical,
engineering, manufacturing, industrial and operational capabilities of the country in accordance with
the Law of Maximum Utilisation of Manufacturing and Services Capabilities in fulfillment of the
country’s needs and strengthening export and modifications to Article 104 of Direct Taxes Law –
ratified in 2011 – and its guidelines.
C) The other party to the contract is obliged to maximise the utilisation of local human resources
in execution of the contract and submit comprehensive training plans aiming at improving the
quality of human resources and making required investment in the context of capital expenditure for
execution of research and education programmes, such as upgrading existing research centres and
establishing joint research centres or executing joint research project. Such plans shall be relevant to
the project operation (exploration, appraisal, initial development, future development including
production and improved oil recovery (IOR/IGT and EOR/EGR)) and shall be made in agreement
with NIOC in every stages of the reservoir’s lifespan and in accordance with each project’s specific
timetable.
In the development company subject of Note A of Article 11, the managerial positions, as per terms
agreed upon in this contract, are rotating. In the management organisation of such company, the
executive management positions shall be gradually transferred to the Iranian nationals in order to
facilitate the process of know-how and managerial skills transfers to the Iranian party.
September 2016
Energy PioneersIran Oil and Gas Monitor
ww
w.energypioneersltd.com
IPC
9
Iranian Oil and G
as Monitor
Article 5: The contracts subject of this Resolution shall be concluded in incompliance with the laws
and regulations governing the transactions of NIOC and following acquiring required licences from
competent legal authorities on per cases between NIOC and the second party to the contract.
Article 6: The conditions for execution of the contracts subject of this approval are as per below:
A) In order to execute exploration operation in a contractual area and the subsequent development
operation (first category of contracts), NIOC shall determine its minimum exploration commitments
and shall invite credible and competent companies to submit their proposal in accordance with the
relevant laws and regulations. With regards to the development operation of a field or a discovered
reserve or operations relating to the enhanced or improved oil recovery of an existing field (second
and third categories of the contracts), NIOC shall present a preliminary structure for the
development by conducting a reservoir engineering study and shall invite credible and competent
companies to submit their proposal. Such plans for both categories of contracts are considered as
guidelines for the proposing companies and shall not prevent receipt and examination of proposals
by new companies.
Note 1: The development operation of a field or a reservoir and operations relating to the enhanced
and improved oil recovery operations (IOR/IGR/EOR/EGR) shall be conducted in phase-by-phase
basis in accordance with the structure of the development plan and for any new phase in accordance
with the behaviour of the reservoir in the previous phase.
Note B: The assessment of the technical and financial capabilities of the domestic and foreign
companies is by NIOC.
B) The project Fee is based on one of foreign currencies accepted by the Central Bank of Islamic
Republic of Iran and is determined by the Ministry of Petroleum based on per additional barrel of oil
for the oil fields or oil reserves and per thousand standard cubic foot gas or per additional barrel of
condensate for gas fields or gas reserves. These fees are determined in accordance with Note E of
Article 3 in order to create inventive to utilise efficient exploration, development, production and
exploitation methods as per the conditions of each project and fluctuate depending on factors such as
the level of production capacity of each field or reservoir and also consideration to the risk index of
exploration areas and are also determined in cash or in kind in accordance with the market prices of
September 2016
Energy PioneersIran Oil and Gas Monitor
ww
w.energypioneersltd.com
IPC
10
Iranian Oil and G
as Monitor
gas and shall be paid according to the prices from the date of start of initial production to the end of
the duration of the contract. The Fee is one of the main factors for determining the tender winner in
accordance with the relevant rules and regulations.
C) The Fee for production of per barrel of oil from oil fields or oil reserves or production of per
thousands standard cubic feet gas and per barrel condensate from gas fields or reserves and the
repayment of direct costs, indirect costs, operation costs together with costs of finance in accordance
with the terms of the contract for execution of the project is paid from maximum 50 percent of
additional crude or condensate production and up to 75 percent of the additional gas production and
other products or their revenues based on market prices from the date of initial production. The
termination of the contract does not refrain the repayment of remaining costs as per the terms of the
contract.
Note: If a portion of production from the fields subject of the contract which are allocated for the
repayment obligations and remunerations to other party of the contract, are required for domestic
consumption as per the Oil Minister’s decision, NIOC is authorised to proceed for a swap.
D) For the second party to the contract, without the approval of NIOC, neither party to the
contract is permitted to transfer whole or part of its share/shares (the transfer of rights and
obligations) under the contract to others.
Article 7: Under the contracts subject of this approval, the Ministry of Petroleum is permitted to
stipulate the duration of the contracts proportionate to the duration required for execution of the
project up to maximum 20 years from the start date of the development operations. The
aforementioned period, in case of execution of enhanced oil recovery project or improved oil
recovery (IOR/IGR/EOR/EGR), the contract period is extendable for 5 year depending on the
individual project’s operational and economic requirements. With regards to the integrated
exploration, development and operation projects, the exploration period, as the case may be, will be
added to the contract’s aforementioned period.
Article 8 - The guidelines of expenditure for achieving contractual objectives are as follows:
A) The costs of descriptive or exploratory operations by applying the Minimum Descriptive or
Exploratory Commitment Principle are determined in the process of choosing the second party to
September 2016
Energy PioneersIran Oil and Gas Monitor
ww
w.energypioneersltd.com
IPC
11
Iranian Oil and G
as Monitor
the contract.
B) The costs and scope of work (SOW) for descriptive or exploratory operations, development
and exploitation is determined for the realisation of the ultimate goals of the project based on annual
financial-operational plan approved and in accordance with the conditions and the behaviour of the
reservoir upon the agreement made between the contracting parties.
C) In each contract, the second party performs its operation within the framework of the
processes annexed to the contract.
D) In each contract, a joint committee is formed for managing the contract, undertaking all the
projects’ operations and making decisions with regards to the financial, technical and legal aspects
within the framework of operation, subcontracting and executing annual financial-operational
projects. The responsibility of conducting operations within the framework of approved operational-
financial projects is upon the second party to the contract. The committee is composed of equal
number of representative from the contracting parties having equal rights to vote. The decisions are
made unanimously by the committee and are confirmed by the competent authorities from NIOC.
E) The whole executive operation is conducted within the framework of the project’s overall
estimations as well as the approved annual financial-operational plan while all the risks and
responsibilities are taken by the committee. Upon the approval of the joint managing committee and
confirmation of the employer/client, the executive operation is delegated to the competent
companies within the framework of operational processes annexed to the contract as the case may
be. No fixed cost is set in this type of contract due to their nature, rather they include Open Capex
and the initial figures are of predictive and estimative nature. The real confirmed costs are taken into
accounts based on annual financial-operational plans being approved according to field’s behavior
and market condition.
F) All the measures set forth in the contract (excluding the management of the entire contract and
conducting reservoir engineering studies) are delegated to competent manufacturers and contractors.
These subcontractors are selected by the main contractor according to instruction annexed to the
contract which is then confirmed by the employer/client in accordance with paragraph (d) of this
Article.
September 2016
Energy PioneersIran Oil and Gas Monitor
ww
w.energypioneersltd.com
IPC
12
Iranian Oil and G
as Monitor
Note: Reservoir engineering studies and their respective costs are admitted by the second party in
the order agreed upon in the contract and are taken into accounts as direct costs.
Article 9: The sum total of direct costs, indirect costs, and relevant finance costs, based on the
contract (as the case may be), and exploitation costs including; exploratory and developmental
operations as well as the plans for improving or boosting recovery factor shall be timely paid by the
contractor.
Article 10: The repayment structure is as follows:
A) The repayment of direct capital costs, indirect costs and contract financing costs (as the case
may be), for the period specified in the contract are calculated and arranged to be paid in
instalments.
B) Direct and indirect costs of the exploitation from the outset of initial production is calculated
and repaid at market prices. Also payment of the contractor’s remuneration is initiated at the same
time based on the terms of the contract.
C) All the payments set forth in Paragraphs (A) and (B) of this article are made to the contractor
at market price or in cash from the resources subject to Paragraph (C) of Article 6 i.e. products or
proceeds of the productions of the reservoir or field subject to the contract.
Article 11: The instruction for the exploitation of the plans cited in the contracts subject to this
Resolution is as follows:
A) With regards to the development plan of the located fields or achievement of additional
production resulted from the contractor’s operation in IOR/IGR and EOR/EGR plans, production
and exploitation of the facilities is conducted by the Iranian company (whose professional
qualifications are endorsed by the employer/client) from the beginning, in keeping with the
liabilities of second party as set in the contract.
Note: With regards to under performance on operation/production from the fields or reservoirs, if the
first party recognise that the participation of its subsidiaries is necessary during the exploitation
phase, provided that the issue is confirmed by the Ministry of Petroleum, a joint operation
agreement is signed between the second party and the subsidiary of NIOC. This operation is jointly
conducted in keeping with the commitments for full technical, legal and professional support and
September 2016
Energy Pioneers
Iran Oil and Gas Monitor
ww
w.energypioneersltd.com
IPC
13
Iranian Oil and G
as Monitor
supervision of the second party along with supplying the required equipment and materials. In
exploiting the facilities subject to the contract, the respective subsidiary company is obliged to
observe and fulfill all the technical and professional guidelines and operational plans of the second
party as approved by NIOC.
B) Oil, gas and condensate and all the other products discovered in the reservoir subject to the
contract wholly belong to the Islamic Republic of Iran; the oil, gas or condensate and all the
byproducts of the production wholly belong to the employer/client.
C) Should the need to fundamental repair of equipment or workover or any operation related to
maintenance of facilities and equipment arises, they are conducted under the permission of the
employer/client and shall be financed by the second party to the contract which along with the
financing costs are later repaid from the revenues of the additional oil produced from the field or
reservoir, to the extent agreed in the contract.
Article 12: NIOC is authorised to sign buyback contracts for the development of located and
undeveloped field or reservoir, if necessary, after obtaining case permission from the Ministry of
Petroleum, in compliance with Article 1 (excluding Paragraph (R) of this Article), Article 3
(excluding Paragraph (E)), Note under Paragraph (A), Paragraphs (B) and (E) of Article 4, Article 5,
Note under Paragraph (B) of Article 6, Articles 8, 9 and 10 of this Resolution. In these contracts,
NIOC is allowed to repay the direct and indirect costs as well as the costs of finance and the
remuneration of the second party in compliance with Paragraph (C) of Article 6 of the same
Resolution applying the routine method of similar contracts in accordance with the timetable agreed
in the contract.
Article 13: In drafting each contract and its annexes, in addition to the provisions explicitly
stipulated in this Resolution, all the rights, obligations and responsibilities of all parties to the
contract in different fields, such as accounting, audit, payment methods or financial repayment,
technical inspection, repair and maintenance, production calculation methods, human resource
training, health, safety and environment, import and export, insurance, confidentiality, terms of
contract termination, force majeure, decommissioning, dispute settlement method and the language
of the contract shall be clearly defined and stipulated in such draft contract.
September 2016
Energy Pioneers
Iran Oil and Gas Monitor
ww
w.energypioneersltd.com
IPC
14
Iranian Oil and G
as Monitor
Article 14: Contracts subject of this Resolution’s provisions are those in which the responsibility for
a field’s operation during production and consequently the repayment of the costs of the second
party and payment of remunerations and wages to the second party to the contract depend on the
success of the second party in production of oil and gas. Therefore, the contracts that depending of
the requirements or necessity will be concluded by NIOC with Oil Services Companies (OSC)(such
as drilling companies) or the EPC/E&C companies and other suppliers of goods and services
(including whether the payments to them are made in cash or are together with finance, such as EPC
contracts), shall follow the relevant regulations and are not subject to the provisions of this
Resolution.
B) 3rdResolution: Details of 6 new amendments to new IPC models
The six new amendments to IPC model were approved at the Cabinet Ministers in September 2016,
encompassing changes to the oil and gas reserves ownership laws and determination of executive
constraints of IPC models. The new amendments were then sent to the Conformity Assessment
Committee of the Parliament and won the vote of approval of the parliamentarians.
These amendments could be summarised as follow:
1. In Paragraph (V) of Article (1), the term “structure” should be added after the term “duty”.
2. The following text should be added as a note to Article (2):
Note: Oil contracts subject of this Resolution are executable in the following cases:
A: Joint reservoirs development contracts
B. Exploration, development and operation contracts for unexplored fields and reservoirs
C: Operation contracts for reservoirs with under 20% recovery factor
D: Oil and gas fields in Caspian Sea, Oman Sea, and northern & eastern areas of Iran
3. The following text shall be added as Note (3) to Paragraph (A) of Article (4):
Note 3: In order to support Iranian Exploration and Production (E&P) companies, the government
shall give them priority in providing financial facilities from banks.
September 2016
Energy Pioneers
Iran Oil and Gas Monitor
ww
w.energypioneersltd.com
IPC
14
Iranian Oil and G
as Monitor
September 2016
4: Article (7) is modified as follows:
Article 7: Under the contracts subject of this Resolution, the Petroleum Ministry is authorised to
consider the terms of the contract in proportion to the time required for implementing the
development plans with a maximum of twenty years from the date of commencing development
operation. Regarding the consecutive exploration, development and operation plans, the duration of
exploration is added to the mentioned period as the case may be.
5. Paragraph (D) of Article (11) is modified as follows:
D) Oil, gas, condensate and other materials available in reservoirs subject of the contract are totally
in the ownership of Islamic Republic of Iran. Also, exercising the ownership rights regarding the oil,
gas and condensate along with any byproducts is upon the employer.
6. Article (15) is modified as follows:
Article (15): Contracts by which the responsibility of reservoir performance during operation period,
and subsequently repayment of the other party’s expenditures and emolument payment as well as
remuneration payment to the second party which depends on his achievements in oil and gas
production compared to buyback contracts, are subject of these amendments; therefore, contracts set
forth by NIOC in accordance with the operational requirements for exploration, production freeze
and other oil operations resulting in development of fields and reservoirs or boosting recovery from
reservoirs with oil service companies (OSC) (like drilling companies) or EPC and E&C contractors
and other suppliers of goods and services (whether their payments are in cash or includes finance
such as engineering, procurement, construction and finance contracts (EPCF)) are under the relevant
laws and are not subject to this resolution.
Energy Pioneers Ltd is a leading Iran energy-focused strategic consulting company, providing a wide range of investment advisory services in support of the development of Iran’s energy sector.
Editorial Office 25 Sackville Street London W1S 3AX England Tel: (+44) 207 692 8978
Iran Oil and Gas Monitor
Copyright © 2016 by Energy Pioneers Ltd. Iran Energy Insight® is a registered trade-mark of Energy Pioneers Ltd. All rights reserved. Access, distribution and reproduction are subject to the terms and conditions of the subscription agreement and/or license with Energy Pioneers. Access, distribution, reproduction or electronic forwarding not specifically defined and authorised in a valid subscription agreement or license with Energy Pioneers is willful copyright infringement. H
A Publication
[email protected] www.energypioneersltd.com
Hamid Soorghali
Top Related