Desired Properties in Oil Contacts: Economic and Historical Approach in the Performance of Iranian Oil Contracts

After reviewing briefly the Iranian oil contracts from Reuter and D’Arcy concessions to buy-back contracts, we have examined the desired properties of oil contracts as follows: sovereignty and ownership over oil resources, national rights and interests in the chain of oil operations, transfer of technical knowledge and skills, and finally improvement in Government revenues resulting from oil production. An evaluation of oil contracts over a period of 140 years since Reuter’s concession in 1872 reveals the fact that the main attention of Governments has always been focused on gaining higher foreign exchange revenues. In principle, the sovereignty and ownership of oil resources have not usually been a conflicting issue amongst Governments and IOCs due to the fact that the permanent sovereignty over natural resources is well-recognized in international law. However, the point of prime significance is the identification of the impact of this property on the process of oil operations by IOCs, which depends entirely on the knowledge and expertise of NIOC. The other two properties are, more or less, emphasized in all oil contracts, yet without producing any tangible results due to the lack of endogenous efforts to advance technical knowledge and skills in oil industry as well as a change of Government’s outlook to the role and status of oil in economic development. Otherwise, contracts with IOCs cannot be expected to enhance technical and managerial capabilities of NIOC towards becoming a national-international oil company.