Oil Contracts from MER and IOR/EOR Standpoint:The Resilient Economy Approach

Articles 14 and 15 of the Grand Policies of Resilient Economy emphasize the following two principles: i) «Enhancing the strategic reserves of Iranian oil and gas … and improving the production capacities …» and ii) Observing the “maximum efficient rate of recovery (within IOR/EOR programs). Hence، oil contracts are optimum upon the satisfaction of these two principles. An emphasis is also given، in the introduction to the Grand Policies of the Resilient Economy، as to the necessity of «an economy based on knowledge and technology، founded on [the principles of] justice، endogenously driven with outward-looking approach، dynamic and progressive.» The application of these four requirements in designing optimum oil contracts may provide four other principles، namely، improving technical-managerial capability of NIOC، securing the inter-generational interests in exploitation of oil reservoirs، transforming NIOC to a national-international oil company، and attaining a competitive status in the global oil market. From the above-mentioned six principles، this paper examines optimum oil contracts by using MER and IOR/EOR principles only، with a brief reference to NIOC technical-managerial improvement. We have shown that the structural conflicts between the objectives of IOCs and NIOC، i. e.، the profit maximization within the principles of profit-seeking corporations، and the economic value maximization of reservoirs within the framework of securing long-term national interests، will make it impossible to conclude an optimum contract with IOCs satisfying the requirements of the resilient economy. This paper concludes that the only contracts which are compatible with the principles of resilient economy are technical and managerial support and cooperation contracts with oil service companies.