An attractive upstream development contract model is needed if Italian energy firm Eni or Total are to invest in Iran once sanctions are removed.
The point was made by Eni chief executive Claudio Descalzi today when he remarked: "We lost so much money in the buy-back. It is clear that for our company, unless we change the contract, it is not possible for us to go back."
And his opposite number at Total, Patrick Pouyanne, said: "There are sanctions and we cannot discuss any contract. I respect the sanctions regime. If you want to develop reserves you need to find the right partnerships. The price will have to be well balanced. If we have the same type of contracts as the one we have in Iraq, I am not sure we will be part of that."
Iran plans to offer 56 oil and gas projects under its new Iran Petroleum Contract (IPC) in London in September. Unveiling of the IPC has been delayed several times as negotiations between Iran and international powers over Tehran's nuclear programme dragged. But a framework agreement was reached earlier this year, raising the prospect of a lifting of sanctions if a definitive deal is reached.
The new model will offer much longer operating periods for foreign oil countries and they will receive a share of output as joint-venture partners with state-owned NIOC.
The buy-back model was increasingly unpopular with foreign oil companies before sanctions were imposed on Iran by the US and EU. And the Iraqi service contract model, which pays foreign companies a tariff for incremental production, has seen renegotiations and underpayment by Baghdad.
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