World oil giants have shown interest in returning to Iran following the easing of sanctions against Iran in light of the implementation of Tehran’s nuclear deal with world powers.

American companies will welcome investment in Iran’s oil sector if the international sanctions against the country are lifted, deputy oil minister Ali Majedi, told the country’s official news agency, IRNA, in March. However, although US companies have frequently announced willingness to come back to Iran, no formal negotiations have been conducted so far, Majedi noted.

But with or without a lifting of economic sanctions on Iran, the country’s oil industry will be moving forward, according to oil minister Bijan Namdar Zanganeh. this progress in the long neglected sector is the result of a new type of oil contract, announced in February, and designed to attract foreign investment in iran’s rich oil and gas fields.

Iran is looking at 20-25-year term contracts for oil and gas development projects being awarded to foreign executives operating in Iran, said Ayeh Katebi, an adviser to the revising committee of oil ministry contracts. Unlike their predecessors, which were of between three and five years duration,
the new model contracts offers foreign investors the opportunity to enter into long-term project agreements of anything up to 25 years, Katebi confirmed.

Mehdi Hosseini, who heads the oil ministry’s oil contracts revision committee, said Iran’s new contracts are flexible and have been compiled in line with international conditions. Iran’s oil ministry will host a conference in London in July to introduce the new contract terms to international companies.

British petroleum (BP), Malaysia’s Petronas, Royal Dutch Shell, Repsol, of Spain, Russia’s Lukoil, France’s Total and Italy’s ENI have all expressed interest in resuming work in Iran.

Assuming a best-case scenario with sanctions lifted, it would take Iran at least three to six months to lift domestic production to levels enabling it to recover the one million barrels a day in lost exports, according to estimates from Michael Wittner, global head of oil research at Societe Generale, and perhaps longer if the oil sector has not been performing routine maintenance on the shut-in wells and fields, he added.

Ultimately, Saudi Arabia – the world’s largest oil exporter and opec swing producer – will likely accommodate the return of Iranian crude exports by pumping less of its own oil.

“The bottom line is that we believe the Saudis will offset an Iran recovery, whenever it happens, if it happens, by cutting to offset,” Wittner told the media. “It will not be an issue for Saudi Arabia to cut from 10 million barrels a day to nine million. that’s where they were before the 2011 Libyan civil war and that’s where they were just a few months ago.”

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