Incentive package announced to facilitate upstream oil and gas contracts

According to Energy Press, the National Iranian Oil Company (NIOC), this decision aims to increase the production capacity of crude oil to 4.8 million barrels per day and crude gas to 1.340 million cubic meters per day, and within the framework of implementing Article 12 of the Law on Removing Barriers to Competitive Production and Improving the Country’s Financial System.
Based on the resolution of the Economic Council, an incentive package for investment and development in the upstream oil and gas sector of the country has been developed and approved, the axes of which are aimed at facilitating contractual processes, increasing investment attractiveness, utilizing financing capacities, and employing new economic tools.
According to this package, the period for concluding and approving upstream oil and gas contracts from the moment of submitting the development plan by investors is set at a maximum of 6 months, which will include 4 months for internal negotiations and processes between the Ministry of Oil and the National Iranian Oil Company, and 2 months for the review and approval stages by the country’s Planning and Budget Organization.
Also, in order to increase the competitiveness of these contracts compared to similar models in the region and attract domestic and foreign investment, the internal rate of return of the aforementioned contracts has been set between 20 and 23 percent in foreign currency.
Within this framework, all current and future contracts in the upstream sector will enjoy the capacities approved in the financing guidelines of the National Finance Council. On the other hand, the investor and contractor companies contracting with the National Iranian Oil Company will be eligible to receive performance bonuses in excess of the contractual wage if they achieve cumulative production higher than the amounts foreseen in the contracts.
Also, in order to enhance transparency and use modern financial instruments, investors will have the opportunity to disclose their future income and benefits in these contracts.