Critical Review of IPC’s Fiscal Regime

Over the last decades, the buy-back contract model in Iran’s petroleum industry was a valuable tool that kept evolving over the last 3 generations. Despite its significance, it was always faced with heavy criticism. After the sanctions against Iran and the occurrence of Joint Comprehensive Plan of Action, there was a crucial need of international investment by joining foreign investors and contractors on behalf of the host government. Thus, there was a vital need for an enhanced model contract, after changes in laws, allowing this agreement. Because most of Iran’s current reservoirs have been depleted, it is essential to do sustainable exploit with a maximum efficient rate of recovery including prioritizing use of shared reservoirs. This has led to the enactment of a new model of oil and gas contracts called IPC. This new model has its own flaws especially in fiscal regimes and is faced with criticism. This paper attempts to analyze and respond to these critical reviews. Although there are some gaps in the model, it can pave the way for advancement of economic and fiscal regimes leading to further foreign investments, in hopes of strengthening Iran’s position in OPEC and world trade of oil and gas for long-term.