A Legal Analysis of Production Sharing Contracts in Upstream Petroleum Industries and its Applicability in Iran’s Laws

Abstract

The history of petroleum industry shows that host countries after the virulent experiences in old concession system and international revolutions in the middle of the twentieth century, were appealed to new investment petroleum system. The new investment system has been known as the framework of production sharing contracts. It is believed that the first reason for the appeal to the contractual pattern is that these contracts respect the countries’ sovereignty principle about natural sources. The second reason is that fiscal components in these contracts are flexible and attractive. However, Iran, despite it’s been quite a long time since the Islamic revolution, is dubious about using the production sharing contracts. It is stated that the reasons for this are that first of all Iran’s sovereignty on natural sources will be ignored; and secondly the legal obligations prohibit that. This article legally analyzed sovereignty and main fiscal elements of contracts and explained the optimal feature of these contracts. Then, we explained the applicability of the contracts in Iran’s fields through researching the status of Iran’s petroleum regulations, and finally presented the essential proposal.

Keywords

• production sharing contracts
• host country
• foreign investor
• iran’s petroleum regulations