Comparative Investigation of Financial Systems of Service Contracts in Iran and Iraq Oil and Gas Industry With Respect to Valuing Hydrocarbon Reserves

Valuing reserves is important and essential for international oil companies because it enables them to finance projects at low rates in the financial markets.  One criticism of buyback contracts is that they do not allow the contractor to reflect the value of reserves on its books. The purpose of this study is to investigate this issue in comparing Iran and Iraq oil service contracts with respect to joint fields.  We undertake the study by examining primary sources such as rules and regulations related to oil producing companies in the USA, related international financial standards and financial provisions of Iran and Iraq oil service contracts.Our research indicates that procedures for valuing reserves on contractors books are not clearly stipulated, but in theory it should be possible to reflect reserves under all contracts reviewed. However, in practice reserves can be reflected on contractors books under the new Iran petroleum contracts and Iraq service contracts, through use of percentage work completed under long term contracts, but use of this method is not possible in buyback contracts.