Iran Signs First Oil Contract Based on New Model with Domestic Company

Iran signed its first oil contract based on the new model known as IPC (Iranian Petroleum Contract) on Tuesday, October 5, with a domestic company affiliated with the Imam Executive Headquarters. According to the official news agency of the Islamic Republic, IRNA, the Ministry of Oil signed an HOA (Head of Agreement) worth $2.2 billion aimed at increasing the recovery factor of three oil fields with the Tadbir Energy Group. The HOA contract is the first step towards signing a legal agreement or main contract and outlines the responsibilities of the parties before drafting any binding documents. The recovery factor refers to the amount of oil that can be extracted from the fields. The average recovery factor of Iran's oil fields is about 25%, meaning only one-fourth of its reserves can be extracted. Iran is trying to increase this factor. Based on the new model of oil contracts, Iranian companies must choose foreign partners, and foreign companies that win a tender must introduce an Iranian company as a partner. According to the signed agreement, the Imam Executive Headquarters is responsible for increasing the recovery factor of the shared fields of Yaran, Kupal Asmari, Kupal Bangestan, and Marun Bangestan. The first phase of development of the Northern Yaran field has so far achieved 89% progress, and daily production of 30,000 barrels of oil from this field will begin in the coming months. Additionally, the Southern Yaran field currently produces 5,000 barrels of oil per day, and this figure is expected to double. The development of the West Karun block, which includes North and South Azadegan, Yadavaran, and Northern and Southern Yaran, with over 64 billion barrels of in-situ reserves, is among the government's priorities. These fields, all shared with Iraq, currently account for a 6% share of the country's total crude oil production. Iran also extracts 94,000 barrels of oil per day from the Kupal field. During the sanctions that began in 2012, oil and gas condensate exports dropped from 3.7 million barrels per day to 2.8 million barrels per day, but this figure returned to 3.65 million barrels per day after sanctions were lifted in January 2016. Bijan Namdar Zangeneh, at the contract signing meeting with the Tadbir Energy Company, stated that Iran needs $100 billion in investment in the oil and gas sector. Iran claims it intends to increase its production to six million barrels per day in the coming years, and for this reason, it has designed a new type of contract with foreign companies to attract foreign investments. The development of 49 oil and gas fields will be tendered in the coming years based on the new oil contract model.