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Iran ratifies IPC terms

Iran ratifies IPC terms

Aug 07, 2016
2 min read
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Iran has taken a large step towards opening up its oil industry to foreign investment as the Iranian cabinet ratified a regulation governing the general conditions, structure and terms of upstream oil and gas contracts in the country.

The new Iranian Petroleum Contract (IPC) will replace the buy-back system Iran has employed for the past twenty years.

“The IPC Regulation is a material step in securing the Iranian government's approval of the terms of the Iran Petroleum Contract.  The IPC Regulation still needs to be approved by Iran's parliament, but the risk of a reversal at this stage is unlikely,” said Richard Devine, Partner at Clyde and Co; the firm responsible for translating the resolution.

The IPC regulation will govern a wide range of activities in Iran’s oil and gas industry, as Devine explains.

“The IPC Regulation provides that there will be three types of IPC:  a contract for exploration, development and production (Exploration Terms); a contract to develop existing discoveries (Development Terms); and a contract for improved/enhanced oil recovery at existing fields (IOR Terms).  The Development Terms and IOR Terms will be focused on improving recovery rates from the relevant field and we assume that the service fee will only be payable if the Contractor meets certain production targets. Because of the fixed upside and potentially extensive downside of exploration for the Contractor, service contracts are more typically used for brownfield projects and very rarely used for exploration projects.”

 

For an in depth analysis of this story, see September’s issue of Pipeline Magazine.  

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