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Iran offers new terms for oil contracts

Although international sanctions are still in place pending the outcome of the nuclear talks, Iran is proposing new investment contracts to raise profits and reduce risks to attract international companies to its energy sector.
Iranian Oil Minister Bijan Zanganeh talks to journalists before a meeting of OPEC oil ministers at OPEC's headquarters in Vienna December 4, 2013. Zanganeh said on Wednesday he expected Iranian oil output to reach 4 million barrels per day at the end of next year. REUTERS/Heinz-Peter Bader  (AUSTRIA - Tags: POLITICS ENERGY) - RTX1635R

Iranian oil officials introduced a new type of investment contract for its upstream energy industry at a two-day conference in Tehran on Feb. 23. The new Iran Petroleum Contract will offer greater incentives to international oil and gas investors by offering higher potential profits and lower investment risks. The goal of contract is to attract investment and technology to the Iranian oil industry and to increase the industry’s overall crude oil and natural gas production.

Over the past decade, international sanctions have thwarted the required (and necessary) levels of investment and technology for Iranian oil and gas fields. Sanctions reduced Iranian oil production capacity from over 4 million barrels a day to around 3.5 million to 3.7 million. Iran possesses the second-largest natural gas reserves in the world, but has less than 1% of global market share. Iran still might not be able to gain any new oil and gas investment contracts — largely due to sanctions still in place — until it reaches a complete agreement with the West on its nuclear program. Only then, by offering more flexible terms, could Iran once again draw investors’ attention toward potential exploration and development projects.

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