By: Dr. Christian Ule and Dr. Alexander Brexendorff

Introduction

After years of political instability, Iran has been identified as a high priority market for the oil and gas sector. This is a result of the current and anticipated high level of investment, in both the oil and gas sectors. The focus will be on how to increase oil production from existing fields, develop new oil and gas fields and increase the capacity of the country's refining and petrochemical sector to meet domestic requirements. Large reserves of both oil and gas ensure that this market represents a long-term business opportunity, which will progress as foreign investment is secured.                                                                                                      Currently Iran is the fourth largest oil producer globally with approx. 9% of the world’s oil. Oil production is important to the country, contributing 30% of the state budget and 80% of hard currency. 14.9% of the world's gas reserves are also found in Iran placing the country second only to Russia worldwide. Still, the petroleum industry's contribution to the state's gross domestic product (GDP) counts for only 8%, and is much below the 30-40% that the industry contributed prior to the conflict between Iran and Iraq.                                                                                                           The aim of this paper is to identify the foreign investment opportunities in the Iran energy and petroleum (E&P) sectors.  The structure to achieve this is as follows: First, an overview of the history of foreign investment in the Iranian Petroleum sector will be provided. This will include a brief description of the sanctions imposed by the US government. Secondly, an analysis of the oil and gas reserves and petrochemical industry in Iran will be completed. It will be shown that energy products produced in Iran account for a considerable amount of worldwide consumption already, despite growth opportunities being available. Thirdly, a broad analysis of the Iranian laws which may affect potential foreign investment will occur. The final section will consider the buy-back agreement, the most commonly used form of agreement that the Iranian government concludes with foreign investors for energy and petroleum projects. In the examination, the principle features of the agreement and the identifiable shortcomings will be focused upon.

Table of Contents

Introduction
  The history of foreign investment in the Iranian petroleum industry
  Table 1: Gulf Country Share of Total Proven World Oil Reserves
  Table 2: Gulf Country Share of Gas Reserves
  Iranian Politics under US Sanctions.
  E&P Industry.
  Table 3: Signed Buy-Back Agreements.
  Petrochemical Industry.
Legal Background
  Iranian Constitution.
  Iranian Petroleum Law
  New Foreign Investment Law
  Area of coverage
  Table 4: Relevant
  Shortcomings
Arbitration Law
The Contract's Governing Law.
Legal Regime Surrounding Bank and Insurance-matters
Labor Law
Company Law
Tax Law
The history of Iranian Buy-backs in the international oil & gas contract perspective
  Concessions
  Production Sharing Agreements
  Buy-back Agreements

Key Issues of the Iranian Buy-back Agreement
  Table 5: The basic structure of a buy-back arrangement:

Commercial terms of a buy-back agreement.
  Table 6: Relevant figures of the N.I.O.C.-Dutch/Shell buy-back agreement

Criticisms of the Iranian Buy-back Agreements
  Deficiencies from the Contractor's perspective
  Deficiencies from the Iranian perspective

Implications of the New Foreign Investment Law for Buy-back Contracts.

Buy-back Project Economics
  Table 7: Iranian Buy-back Project.
  Table 8: Project Schedule and Costs in 1995
  Table 9: Iranian Buy-back Project, Simplified Cash Flow
  Table 10: Revenue Distribution From a Buy-back Offshore Development
  Table 11: Relationship of Capital Expenditures and IRR & NPV in the Iranian Buy-back
  Program for a Typical Offshore Development
The Future prospects for foreign investment in the Iranian E&P industry

I R A N I A N MO D E L B U Y - B A C K C O N T R A C T ( O V E R V I EW)

Bibliography.

Notes

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Gemeinsam herausgegeben mit dem F.A.Z.-Institut, manager magazin und Coudert Schürmann (Co-Autor: Dr. Christian Ule).

Der Investitionsführer Iran/Golfstaaten gibt zunächst einen Überblick über die politische und wirtschaftliche Entwicklung in  der Gesamtregion, die Rolle der Region für den Weltölmarkt   sowie Finanzierungsmöglichkeiten und Bankensysteme. Es folgt eine Einzeldarstellung der rechtlichen und wirtschaftlichen Rahmenbedingungen in den Staaten Bahrain, Irak, Iran, Kuwait, Katar, Saudi-Arabien sowie der Vereinigten Arabischen Emirate.

Aus dem Inhalt: Politischer und wirtschaftlicher Hintergrund Einreise- und Aufenthalts-bestimmungen Unternehmensformen Investitions-, Arbeits-, Steuer- und Vertragsrecht Devisen- und Zollbestimmungen Nützliche Kontakt- und Internetadressen.

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Autoren: Dr. Christian Ule und Alexander Brexendorff

Diese Broschüre gibt Ihnen in der bereits dritten Auflage einen umfassenden Überblick über die aktuellen Möglichkeiten und rechtlichen Ramenbedingungen für Investitionen und Geschäfte im Irak. Die zweite Auflage ist online einsehbar.

Die dritte Auflage ist gegen eine Schutzgebühr in Höhe von EUR 10,-- erhältlich.

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