News last week suggests a new frontier in oil exploration may be on the verge of opening up. Creating some big opportunities for the world’s E&P firms.
That’s Iran. Where the country’s Petroleum Ministry announced that it is working on a revamp of its production sharing contracts for oil and gas development.
Foreign companies have been working in Iran for years. But under a slightly different arrangement than in most parts of the world. Operators like Total have produced oil under “buyback contracts”. Where the Iranian government simply pays them a fee on the volumes of crude pumped from government-owned fields.
This meant the operating firm didn’t actually own the reserves. Just a cash flow stream in exchange for ensuring the smooth functioning of production systems.
But it now appears the Iranian government will move to a more traditional regime. Where foreign joint venture partners with the government will actually own a share of the production from the fields they’re involved in.
That’s makes working here a lot of more attractive for big players. Who generally want to book as many in-ground barrels as possible in reserves. In order to show investors their inventories aren’t depleting.
With these changes coming, Iran could become a sought-after exploration destination for the first time in decades.
A draft model of the new operating contracts has already been presented by the Iranian ministry. We get more details on the exact terms over the coming months.
Of course, it will be critical to see what parameters are used for royalties, production shares and cost recoveries. But indications are the nation is earnestly seeking new partners to help boost production.
If the terms do come back fair, this could be the next rush for the oil industry. Iran still has a lot of potential–especially if international technology is imported in a significant way.
Here’s to being an owner,
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