Tips for foreign investors eyeing opportunities in post-sanctions Iran

Foreign investors should be cautious and aware of the regulations, writes Azadeh Meskarian

By Azadeh Meskarian

Published on Gulf Business on 6th December 2015

As the holder of the world’s largest gas reserve and the fourth-biggest oil reserves, Iran recently revealed its remodelled Iran Petroleum Contract replacing its previous buyback deals.

This is in line with Iran’s widely publicised intention to increase its oil production capacity after the lifting of sanctions to approximately five million barrels a day from about one million bpd since the imposition of blanket sanctions on Iran’s oil and gas sector.

The new IPC will cover different stages of exploration, development and production and will be offered to contractors as an integrated package for an estimated duration of 15 to 20 years.

Iran hopes to attract around $30bn of foreign investment necessary to substantiate its intention to increase its oil production despite the falling oil prices. Although as far foreign investment is concerned, changes to domestic law may be necessary to make the system more transparent and reliable.

Another thing to note is the possibility of snap-back of the sanctions if there is any doubt about Iran’s performance under the Joint Comprehensive Plan of Action. So it may take time for the necessary level of confidence to build up for significant foreign investment.

The new framework is expected to create a win-win situation for both the foreign investors and the Iranian side of the deal, and hopefully attract medium-sized foreign investors as well as the previously present multinationals.

It will also bring about potential opportunities for foreign companies to book reserves or take equity stakes in Iranian companies. It is worth noting that National Iranian Oil Company will maintain exclusive ownership of all resources.

Read more on Gulf Business of 6 December 2015