Iran: eyes on the prize

Tehran's attempts to lure foreign oil companies into its upstream sector with improved terms have, bar a few exceptions, failed to make much headway. Tinkering with the buy-back formula is unlikely to hasten the entry of IOCs, reports James Gavin

TARDINESS in setting more-attractive terms for foreign investment has long been a trait of Middle East oil, where a strong in-built resistance to foreign entry into prized upstream hydrocarbons persists. But in Iran, this talent has been honed into a fine art. Six years on from the first implementation of its vaunted buy-back formula—a type of service contract in which the contractor funds all investment and is paid in the form of a fixed production share before transferring the field's operation back to National Iranian Oil Company (NIOC)—Iran has failed to secure anything like the foreign investment required to boost its oil-production base significantly, or realise its massive natural gas