An economic analysis of Iranian petroleum contract

Fazel M. Farimani, Xiaoyi Mu (Lead / Corresponding author), Hamed Sahebhonar, Ali Taherifard

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Abstract

Following three generations of buyback contracts, the new model of Iranian petroleum contracts (IPC) was introduced by the Iranian cabinet to incentivize investments in the country. This paper analyzes the fiscal terms of the contract with technical information from one of the candidate fields for licensing. The financial simulation shows that, in general, the IPC resembles more a service contract than a production sharing contract as the contractor’s take is relatively low—below 5% across different scenarios of crude oil price. Second, the IPC is progressive in that as the overall profitability of the project improves the government takes an increasing share of the economic rent. The results are confirmed in a sensitivity analysis of each party’s profitability and takes on oil price, CAPEX, OPEX and the fee.
Original languageEnglish
Number of pages11
JournalPetroleum Science
Early online date31 Jul 2020
DOIs
Publication statusE-pub ahead of print - 31 Jul 2020

Keywords

  • Fiscal regime
  • Government take
  • Iranian petroleum contract (IPC)
  • Petroleum rent
  • Progressive

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