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In the Name of Allah OIL AND GAS LAW
By: Dr S N Ebrahimi
LLB, LLM, PHD International law
24.10.1385
Imam Sadiq University
snebrahimi@yahoo.com
a l l r i g h t s a r e r e s e r v e d

Overview of the Topics

Oil and gas law in Iran Oil and gas law in Middle East Oil and gas law in the European Union International Oil and gas law Energy Law in Europe, National, EU and International Law and Institutions
D r S e y e d N a s r o l l a h
4. AN OVERVIEW OF OIL AND GAS INDUSTRY
Case Studies

Oil and Gas law in Latin America Oil and Gas law in European Union
North Sea Oil and Gas Law Ukrainian Oil and Gas Law Russian Oil and Gas Law
Oil and Gas law in African Continent Oil And Gas Law in Far East
Oil and Gas in Middle East

Indonesian Style Saudi Arabia Kuwait Oman UAE
Oil and Gas in the Caucasus/Caucasian region

Oil Consortium Agreement with Azerbaijan OIL AND GAS LAW-Kazakhstan style Turkmen Oil and Natural Gas
Imam Sadiq University 1385
E b r a h i m i
North Sea oil
Opportunities of North Sea Oil Since the 1970s :
a major source of wealth for both the British and Norwegian economies a way for Europe to cut its dependence on Middle East oil. key component of the increase in non-OPEC oil production over the last 20 years
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North Sea oil
Studies show that using development of small marginal fields and introduction of sophisticated exploration and drilling techniques continues:
North Sea output peaked in 1999 and has been on the decline ever since.
North Sea already peaked in 2000 at 6.4 mbd. At that point North Sea oil was 9% of global production and 22% of OPEC production.
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North Sea oil
North sea, the Most Challenging Areas of Oil Exploration and Development:

With severe wind gusts and waves 30 metres high Declining of Many of the major fields in the North Sea Losing its prominent role as one of the world's leading oil domains. Increase of oil demand in European Union (EU) countries 0.4% per year from 2004 to 2030 North Sea output in 2004 would drop to 3.7 million barrels per day (mbd) from over four million last year.
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North Sea oil

Prediction
of Oil Production in EU (most of it from the North Sea) is predicted to fall:

2.3
mbd in 2010 * 1.1 mbd in 2030* * According to the World Energy Outlook 2002 of the
International Energy Agency, EU oil production,, is projected
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North Sea oil
Challegnes of North sea countries (particularly Britain, Norway and Denmark): Swing from net exports to net imports, particularly from the Persian Gulf Generation of a major additional annual burden on the balance of trade of Britain and Norway adding 65 to 85% to the level of these countries trade deficit. Will be forced to import more oil from remote areas incurring higher transport costs.
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D r S e y e d
General Glance on Oil Industry in Iran
N a s r o l l a h
E b r a h i m i

2nd
largest gas reserves 4th largest oil reserves Rich in minerals Founding member of OPEC Important player in todays world oil market, Great potential for future oil and gas discoveries and for increasing production and exports.
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National Iranian Oil Company Oil Reserves Natural Gas Foreign Investment Buy-Back Contracts Petrochemical Industry Major Oil and Gas Projects
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D r S e y e d
Chronology events of Iran Oil Industry
N a s r o l l a h
E b r a h i m i
Chronology events of Iran Oil Industry 100 years of Oil and Gas activities in
IRAN In 1901, wealthy Englishman William Knox Darcy obtains a 60 year concession from Shah for exploration of the countrys oil resources
In 1906, Constitutional Monarchy is established. No change in Darcys concession

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In 1908, Darcy team makes the first commercial discovery in the middle east, at Masjid-I-Soleiman in south-west Iran In 1909, The Anglo-Persian Oil Company, APOC is formed to develop the field In 1911, A 138 mile pipeline between Masjid-I-Soleiman and a refinery at Abadan is completed (cap.: 2,400 bpd)
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In 1914, APOC signs a 10 year contract to supply the British Admiralty with fuel oil for Navys ships.
The British Government injects 2 million into APOC and gains majority shareholding
In 1917, the APOC buys the British Petroleum Company, thus aquiring a marketing organisation for its products.
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1n 1917, Darcy dies while still holding a seat in the borad of APOC In 1925, Reza Shah, aided by the British Government, establishes himself as the new king of Iran
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In 1928, The worldwide economic depression causes problems of excessive oil supply and falling prices.
APOC and Shell become 50:50 partners for distribution of oil

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Chronology events of Iran Oil Industry In 1932, Falling profits lead to reduced royalties to Iranian government.
Consequently,
Reza Shah cancels the APOCs concession

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In 1933, The British impose a new concession on Reza Shah, the concession extends for an extra 30 years, i.e. until 1991! In 1933, APOC changes name to Anglo-Iranian Oil Co, AIOC
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In 1939, World War II breaks out. Demand for Iranian oil increases. Abadan refinery becomes vital source of aviation spirit for the war effort In 1941, Reza Shah is forced by Allied Forces to abdicate. His son Mohammad-Reza Shah becomes the king
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In 1951, Dr Mosaddegh, the popular Iranian Prime Minister nationalizes the AIOC and forms National Iranian Oil Company, NIOC. This causes an international crisis. AIOC steps up production elsewhere. Dr Mosaddegh becomes man-of-the-year by TIME magazine in US In 1953, Dr Mosaddegh is removed by a CIA led coup. Mohammad-Reza Shah returns to power by American/British aid. Americans get heavily involved in Iranian politics
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In 1954, Irans oil industry restarts under a consortium of oil companies. AIOC is renamed The British Petroleum Company , BP and holds 40% share in the consortium. Americans get 40% with the rest going to the other European oil companies In 1960, Organisation of Petroleum Exporting Countries, OPEC is formed with Irans membership. Falling oil prices were blamed In 1965, North Sea oil becomes a reality. West Sole gas field in the UK is discovered that comes to stream in 1967 by BP
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In 1970, price of oil shoots up to above 30 dollars following Arab countries imposition of oil embargo. Iran does not particpate in the boycott. BP discovers Forties oil field in the North Sea . First major commercial oil find in the UK. This comes into stream in 1975. Cod and Thor fields intorduce oil era in Norway
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In 1979, Iranian revolution occurs led by the spiritual guidance of a great Islamic Revolution leader, Ayatollah Khomeini (r.a.).
NIOC becomes part of Iranian Ministry of Petroleum
In 1997, BUY BACK concept for foreign oil companies to venture in the Iranian oil & gas fields.
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History of Oil Contracts in IRAN

a l l

Before Nationalization of oil in the early 1950s
i
g h t s
Concession Agreement
r e
After Nationalization of oil in the early 1950s
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Production Sharing (Enactment of First Irans Oil Law in 1957) Joint Venture Agreements, (Enactment of the Second Irans Oil Law in 1974) Service Contracts (1976)
a l l

After Islamic Revolution 1979
i
g h t s a r e r e s e r v e d
Service Contracts Financing Oil Projects by NIOC Conclusion of EPC Contracts Risk Service Contracts Buy-Back Contracts for Development Operations Buy-Back Contracts for Exploration and Development Operations Other Contractual Mechanism?
D r S e y e d
Iran Oil Industry Organisation Chart:
N a s r o l l a h
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Iran Oil Industry Organisation Chart: MINISTER OF PETROLEUM National Iranian Oil Co., NIOC National Iranian Gas Co., NIGC National Iranian Oil Refining and product Distribution Co., NIORDC National Petrochemical Co., NPC
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FOUR MAIN COMPANIES UNDER MINISTRY OF PETROLEUM
All upstream operations and activities of the petroleum industry are executed via its four directorates of; Exploration, Onshore Production, Offshore Production, International Affairs. These cover:
1. National Iranian Oil Co. (NIOC)
1) Geological activities, geophysical survey and topography, sesimography, graviometry and magnetometry
2) Exploration and development drilling operations in offshore and onshore zones and duties and responsibilites of National Iranian Drilling Co. (NIDC)
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3) Exploitation of oil and gas resources situated onshore 4) Exploitation of oil and gas resources situated offshore.
KEPCO, afiliated to NIOC, covers Iranian Caspian Sea
5) Supply of basic feed stock of oil refineries and petrochemical complexes 6) Management of marketing operations 7) Transport of crude and refined oil products by sea
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2. National Iranian Gas Co. (NIGC)
The new national policies adapted with a view to promoting greater use of gas, as a clean energy in various economic sectors in order to reduce the consumption of middle distillates.
Paying special attention to the environmental protection issues brings about heavy responsibilities and duties on NIGC.
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NIGC is responsible for treatment, transmission to consumption centres and delivery of treated natural gas to the ultimate users in the domestic, industrial and commercial sectors. For instances, NIGC has five Gas Treatment Plants, GTPs, with a total of process capacity of 207.9 mill.m3 per day:

Bid-Boland GTP 34.00 Shahid H.Nejad GTP 31.30 Aghar & Dalan GTP 39.60 Vali-e-Asr GTP 89.00 Sarkhoon GTP 14.00
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3. National Iranian Oil Refining product Distribution Co. (NIORDC)
The main responsibilities and functions of NIORDC, are production and distribution of various kinds of refined oil products, such as LPG, gasoline, kerosene, gas oil, motor oil, and fuel oil within Iran. The company also transports the crude oil by pipelines from the oil fields in the south to the refineries all over Iran and transports and distributes their refined products.
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The followings are some illustrations of nominal Capacity of NIORDCs refineries:

Abadan Refinery 350,000 bpd Arak Refinery 150,000 bpd (cf. Slagen) Isfahan Refinery 200,000 bpd Bandar-Abbas Ref. 232,000 bpd (cf. Mongstad) Tabriz Refinery 80,000 bpd Tehran Refinery 225,000 bpd Shiraz Refinery 40,000 bpd Kermanshah Ref. 15,000 bpd Lavan Refinery Complex 20,000 bpd
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4. National Petrochemical Co., (NPC)

NPC receives feed stock or feed gas (natural gas, condensate and certain cuts from distillation towers). It produces varieteis of petrochemicals which the surplus to the local demand is exported abroad via its afiliated company Petrochemical Commercial Co., PCC. Over 2000 down-stream chemical plants operating throught Iran receive their basic feed stock from the petrochemical complexes affiliated to the NPC. In order to facilitate greater flexibility in operational and commercial fields the affiliated complexes are managed and operated as joint-stock companies.
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Illustrations of the nominal capacities of these units are as follow:

Arak Petrochemical Complex 951,000 tonnes Isfahan Petrochemical Complex 193,000 tonnes Bandar-Abbas Petroc. Complex 4331,000 tonnes Tabriz & Orumieh Petroc. Cplx. 677,000 tonnes Kharg Petrochemical Complex 431,000 tonnes Khorassan Petroc. Complex 825,000 tonnes Razi Petrochemical Complex 3226,000 tonnes Shiraz Petrochemical Cplx. 1799,000 tonnes
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Buy-Back Projects in Iran since 1995
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BUY BACK Concept for development of the Iranian fields In this concept the foreign company will act as a contractor in the name and on behalf of NIOC to develop the Iranian oil and gas fields and in return will be repaid to the value of the capital expended plus a remuneration fee from the revenues generated from the fields.
Typical development operations period can be 4 to 5 years with 7 to 9 years of amortization period before the field is bought-back by the Iranians through the fields own generated revenues
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This concept puts a heavy initial responsibility on the contractor but can be very rewarding at the end.
However, many companies have managed to satisfy their own investors as to the viability and profitability of such a concept
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Example of Fields under development or exploration Despite the 1996 American law that forbids investment of more than $20 million in any Iranian Oil& Gas project, many foreign companies have chosen to ignore it.
The result has been a net loss of opportunities for American oil companies!
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Main Buy-Back Projects in Iran since 1995

PROJECT CONTRACTOR COSTS DATE OF CONCLUSION
Sirri A&E South Pars (2&3)

South Pars (1) Buy-Back Gas Facilities Dorood Balal
Total Petronas Total

Petro-Pars NIJC NICO Total ENI Total ENI Bow Alley Shell INPEX
1150 4219
1020 1311 998 317
1995 1997
1998 1998 1999 1999
Soroosh & Norooz
1454
1999
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Main Buy-Back Projects since 1995 (cont.)

a l l
PROJECT
CONTRACTOR IRITEC IRASCO Pero Iran ENI Petro Pars
COSTS 472 239 3822
DATE OF CONCLUSION S 2000 2000 2000

e y e d
D r
r AMAK i g h Nosrat & Farzam t SouthPars (Phases 4 & 5) s a South Pars (Phases 6, 7,8) r e Salman r e s Masjed-Solayman e r v Azadegan e d
Petro Pars
Petro Iran
4884
1228
2000
2000
Darkoin
ENI NICO
CNPC NESCO INPEX NICO
920
135 4000 26,373 MUSD
2001
2002 2004
N a s r o l l a h
TOTAL
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D r S e y e d
Reading Materials
N a s r o l l a h
E b r a h i m i
a l l
Reading Materials
David B Keto, Law and offshore oil development : the North Sea experience, New York, Praeger, 1978, ISBN: 0030466466 Peter N Swan, Ocean oil and gas drilling and the law, Dobbs Ferry, New York, Oceana Publications, 1979 Hossein Esmaeili, The legal regime of offshore oil rigs in international law, Aldershot, Hants, England ; Burlington, VT : Ashgate/Dartmouth, 2001 Hazel Fox, Joint development of offshore oil and gas : a model agreement for states for joint development with explanatory commentary, British Institute of International and Comparative Law, London, 1989. Ian Townsend Gault, Offshore petroleum installations law and financing : Canada and the United States, International Bar Association, Section on Energy and Natural Resources Law, London, 1986. Bernard Taverne, Petroleum, industry, and governments : an introduction to petroleum regulation, economics, and government policies, The Hague, Kluwer Law International, 1999
r i g h t s a r e r e s e r v e d
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Reading Materials
Legal aspects of offshore operations (1976-Dec. 82)., Springfield, Va.] : U.S. Dept. of Commerce, National Technical Information Service, [1983] Ian Townsend Gault, The international legal context of petroleum operations in Canadian arctic waters, Canadian Institute of Resources Law, Faculty of Law, University of Calgary Calgary, Alta,1983
Harry Whitehead, United Kingdom offshore legislation guide, Serial Publication, London, Kogan Page, 1980Michael Brynmor Summerskill, Oil rigs : law and insurance : (some aspects of the law and insurance relating to offshore mobile drilling units), London, Stevens, 1979. Hans Jacob Bull , Norwegian offshore petroleum : the legal and administrative response, Stockholn : Almquist and Wiksell, 1981]
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a l l
Reading Materials
Canadian continental shelf law : a proposal for a comprehensive research project by the Canadian Institute of Resources Law to examine all legal aspects of the exploitation of petroleum resources in Canada's continental margin and to publish a treatise thereon, Canadian Institute of Resources Law, Faculty of Law, University of Calgary , Calgary, Alta, 1980. Andrew B Derman , International oil and gas joint ventures : a discussion, with associated form agreements, Chicago, Section of Natural Resources, Energy, and Environmental Law, American Bar Association ; [Tulsa], National Energy Law & Policy Institute, University of Tulsa College of Law,1992. Michael P G Taylor, Joint operating agreement, London : Longman, 1988 Contracts, dispute resolution and the UK petroleum regime in 1989 : Park Lane Hotel, London, 8th and 9th June, 1989 : speakers papers, University of Dundee, Centre for Petroleum and Mineral Law Studies, University of Dundee, 1989 Norsk petroleumsforening, Contracts and taxation in the Norwegian north sea, Norwegian Information Publishers, Oslo, 1977
r i g h t s a r e
r e s e r v e d
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Reading Materials
Oil and gas leasing procedures guidelines Gulf of Mexico Regional Office, United States. Minerals Management Service. Gulf of Mexico OCS Region, Metairie, La. : The Service, 1984 Linda Phillips; Peter Ringrose , Offshore oil development and the law : a nontechnical introduction, St. John's, Nfld., Public Legal Information Association of Newfoundland,1995.
Masahiro Miyoshi , The joint development of offshore oil and gas in relation to maritime boundary delimitation, Durham, UK : International Boundaries Research Unit, University of Durham, 1999.
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Reading Materials
Kirsten Rohrmann , Offshore oil and gas exploration and production : installations : law and insurance, Geneve : Institut universitaire de hautes etudes internationales, 1990.
E D Brown , Sea-bed energy and mineral resources and the law of the sea., London : Graham & Trotman 1984Deborah Harrington , Environmental regulation of offshore petroleum exploration and production : an international response, Archival Material, 1990.
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Reading Materials
Pinheiro Neto Advogados, Oil & Gas Law In Latin America, ISBN:1-57823-082-9, George Philip , Oil and Politics in Latin America, Nationalist Movements and State Companies, Cambridge Latin American Studies (No. 40), ISBN-10: 052123865X Latin America has considerable oil and gas deposits. Argentina, Bolivia, Brazil, Chile, Colombia, Ecuador, Mexico, Peru and Venezuela are the oil countries.
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Reading Materials
Iran Oil and Gas - The Emerging Giant, May 2001, 155 Pages, Houston, TX, http://www.emerging-markets.com
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Articles for Consideration
Oil Consortium Agreement with Azerbaijan (Case Study) OIL CONCESSIONS IN FIVE ARAB STATES 19111953 (Kuwait, Bahrain, Qatar, Trucial States, Oman) OIL AND GAS LAW - INDONESIAN STYLE Oil Industry in Saudi Arabia OIL AND GAS IN Persian Gulf STATES
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Oil and Gas Exploration and Production: Russian Legislation NORWEGIAN OIL AND GAS IN AN INTERNATIONAL PERSPECTIVE Nigeria: Oil and Gas Overview NORWEGIAN OIL AND GAS IN AN INTERNATIONAL PERSPECTIVE Middle East Oil: State Domination in the Sector An asset or a liability in a low price world? Nigerias Oil Revenues and the Oil Producing Areas
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Morocco - Oil and Gas: Crude Petroleum and Natural Gas Extraction AN INTRODUCTION TO KANSAS OIL & GAS LAW Azerbaijan Oil Industry: An Overview Legislative and Contractual Framework for Oil Exploration and Production in Sudan Kuwait - Oil Industry
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Kazakhstan and Oil (Case Study) Future Prospects for Oil Revenues in the Persian Persian Gulf Cooperation Council International Good Governance and Civilised Conduct among the States of the Caspian Region: Oil&Gas as Lever for Prosperity or Conflict Global Oil and the Nation State
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Foreign Oil / Gas Investment in the C.I.S.: Implications for Foreign Investors Egypt - Oil and Gas: Crude Petroleum and Natural Gas Extraction The Emerging Oil And Gas Law In The Faroe Islands
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In the Name of Allah OIL AND GAS LAW

Overview of the Topics

4. AN OVERVIEW OF OIL AND GAS INDUSTRY

Oil and Gas in Middle East

Indonesian Style Saudi Arabia Kuwait Oman UAE

Oil and Gas in the Caucasus/Caucasian region

Imam Sadiq University 1385

North Sea oil

Opportunities of North Sea Oil Since the 1970s :

Imam Sadiq University 1385

North Sea oil

Imam Sadiq University 1385

North Sea oil

Imam Sadiq University 1385

North Sea oil

of Oil Production in EU (most of it from the North Sea) is predicted to fall:

Imam Sadiq University 1385

North Sea oil

Imam Sadiq University 1385

General Glance on Oil Industry in Iran

Imam Sadiq University 1385

General Glance on Oil Industry in Iran

Imam Sadiq University 1385

General Glance on Oil Industry in Iran

Imam Sadiq University 1385

Chronology events of Iran Oil Industry

Imam Sadiq University 1385

Imam Sadiq University 1385

In 1906, Constitutional Monarchy is established. No change in Darcys concession

Chronology events of Iran Oil Industry

Imam Sadiq University 1385

Chronology events of Iran Oil Industry

Imam Sadiq University 1385

Chronology events of Iran Oil Industry

Imam Sadiq University 1385

Chronology events of Iran Oil Industry

APOC and Shell become 50:50 partners for distribution of oil

Imam Sadiq University 1385

Reza Shah cancels the APOCs concession

Imam Sadiq University 1385

Chronology events of Iran Oil Industry

Imam Sadiq University 1385

Chronology events of Iran Oil Industry

Imam Sadiq University 1385

Chronology events of Iran Oil Industry

Imam Sadiq University 1385

Chronology events of Iran Oil Industry

Imam Sadiq University 1385

Chronology events of Iran Oil Industry

Imam Sadiq University 1385

Chronology events of Iran Oil Industry

NIOC becomes part of Iranian Ministry of Petroleum

Imam Sadiq University 1385

History of Oil Contracts in IRAN

History of Oil Contracts in IRAN

After Nationalization of oil in the early 1950s

History of Oil Contracts in IRAN

Iran Oil Industry Organisation Chart:

Imam Sadiq University 1385

Iran Oil Industry Organisation Chart:

Imam Sadiq University 1385

Iran Oil Industry Organisation Chart:

Imam Sadiq University 1385