Full service solution for contractors who intend to enter the Iranian oil and gas market

CBC Oil and Gas (“CBC”), Margetson Van ‘t Zelfde & Co (“MvtZ”) and Philip Sidney have teamed up to offer a full service solution to contractors and oil companies who intend to enter the Iranian oil and gas market

Easing of sanctions:
Due to the easing of sanctions it is expected that as of the first quarter of 2016 there will be a lot more opportunities in Iran for foreign businesses in the oil and gas industry. Iran has been anticipating this development for some years now and has prepared a new contract model, known as the “Iran Petroleum Contract” or “IPC”.

After Implementation Day, most likely to occur in the first quarter of 2016, the EU will allow for e.g. the sale, supply, transfer or export of equipment or technology, technical assistance, used in the oil, gas and petrochemical industries in Iran, covering exploration, production and refining of oil and natural gas, to any Iranian person, in or outside Iran, or for use in Iran. Granting of any loans or credits to, the acquisition or extension of an (already existing) participation in, and setting op JV’s with, any Iranian person engaged in the oil, gas and petrochemical sectors in or outside Iran. Financial, banking and insurance services will be available.

Under the U.S. lifting and waiver of sanctions program, much of the same will be allowed, including doing business with NIOC, NITC and NICO. The U.S. however differentiate between ‘primary’ and ‘secondary’ sanctions that affect the involvement of U.S. persons. For instance: non-U.S. financial institutions will continue to be constrained by U.S. ‘primary’ sanctions (i.e. U.S. rules which affect what U.S. persons can do), particularly controls on U.S. dollar clearing. Hopefully, OFAC will issue guidance and/or general licenses soon.
And of course: all U.S. and EU (re-)export controls will remain in place, but this is a topic all parties are still familiar with.

Purpose of the IPC:
The IPC is intended to be a model contract that covers the entire life cycle of a field. Its purposes are to attract International Oil Companies (IOC’s) to Iran; whereby

i) the IOC’s are expected to become the operator of the fields that they participate in and to invest in, develop and operate those fields.
ii) the IOC’s are expected to enter into long term relationships with on the one hand the NIOC and on the other hand with local Iranian Contractors with whom they are intended to enter into a long term relationship and to transfer technology and know-how to;

Contractors who enter into a form of cooperation with an IOC will also have the opportunity to finance the development of field.

Consequences of the IPC for foreign Contractors
The intention of the IPC that IOC’s form long term relationships with local contractors has as a consequence that foreign contractors who wish to be successful in Iran must work together with Iranian contractors.

What foreign contractors should be aware of when entering the Iranian oil and gas market:
We recommend that foreign contractors who intend to work in Iran should:

i) Identify a suitable Iranian partner and decide on the right form of cooperation with that partner e.g., a joint venture agreement, incorporated limited company or other form of partnership.
ii) Be aware of the sanctions and export controls that will still remain in place. Foreign contractors must continue to comply with international law and need to know what is and what is not possible, what legal formalities have to be fulfilled, what permits are required etc.
iii) After the foreign contractor has entered into a form of cooperation with its Iranian partner, contract negotiations with the IOC’s will have to  be entered into when bidding for work. A sound understanding of the risks of contracting in the offshore industry will be required.

CBC, Philip Sidney and MVtZ offer a full service solution
Following the successful Iran Offshore projects outlook summit in Wassenaar on 27/28 October 2015, CBC, MvtZ and Philip Sidney decided to combine their respective core competences and expertise to offer a full service solution to foreign business that intend to enter the Iranian oil and gas market.

CBC: provides focused market research for clients in oil & gas, power and renewable energy plants and energy offshore sectors, as well as provide local facilitation and execution assistance in related projects. CBC renders administrative services, which include relevant insurances (for workers, assets), procurement of equipment and materials, office registration and mobilization and arranging required governmental permits. Furthermore CBC can support its clients in the recruitment of local staff in Iran, for which it will among others tap on its local association with the Talented Engineers and Expert network.

Philip Sidney: is an expert consultancy firm that has unique understanding of the limitations and thus also room for doing business under international sanction regimes and export control systems. Philip Sidney not only renders advisory services but is also active in the execution of compliance policies, e.g. setting up and maintaining risk category systems for products and carrying out relation- and transaction screenings and full third party and transaction due diligence.

MvtZ: are experts in offshore (energy) contracting in challenging jurisdictions. They negotiate, advise on and drafts all types of contracts in the offshore industry such as e.g.: EPCI, EPC, T&I contracts as well as all types of related charter parties, services contracts, pre-bird agreements, joint venture agreements etc. MvtZ’s experience will allow foreign contractors that enter the Iranian market to avoid the pitfalls of entering into JV agreements with foreign company and contracting in a foreign jurisdiction

Please contact Nigel Margetson if you would like to discuss further how we can assist you (M: +31 6 144 177 65 E: nigel@margetsonlaw.nl).

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