Legitimacy of Application of Production Sharing Contracts in Iran's Oil Industry Utilizing the capacity of the Mines Act

Document Type : Research Article

Authors

1 International Commercial Law Dept., Shahid Beheshti University

2 International Commercial Law Dept., Faculty of Law, Shahid Beheshti University, Tehran, Iran

Abstract

Legitimacy of Application of Production Sharing Contracts in Iran's Oil Industry Utilizing the Capacity of the Mines Act

One of the challenging issues in the Iranian petroleum industry over the past decades has been the issue of applying contractual method of production sharing for the development of hydrocarbon fields. In fact, the interpretation made by a number of directors and policymakers in the field of oil industry that application of production sharing contract is unlawful due to conflict with Article 45 of the constitution, has become an obstacle to the evolution of oil contracts in Iran, which even after approval of Petroleum Ministry Act in 2012 authorizing the application of participatory contractual methods in the upstream sector, virtually no change has occurred so far. In article 45 of the Constitution, oil resources are not mentioned in the category of Anfal, but from the jurisprudential and constitutional point of views, oil resources are considered as mines (Anfal).
It is important to note that the Mines Act has authorized concessionary model for the exploitation of mines. Therefore, it is argued that when, from the perspective of the Constitution, mines and oil resources both are considered as Anfal, why the legislator has allowed the use of concessionary method for exploitation of mines while application of the production sharing method in the oil industry, which is far better than the concessionary model in terms of public interest, is in contradiction with Article 45? A careful examination of the theoretical and legal bases for the exploitation of oil and mineral resources suggests that, contrary to what is being interpreted, the common legal basis between mineral resources and oil resources, that is to say, both being regarded as Anfal, implies the logical consequence that when using the concessionary method for exploitation of mines is permissible, the use of the production sharing method in oil industry is legally much more permissible. It is noteworthy that the analytical approach adopted in this research is based on library studies.

Keywords

The Journal of Islamic Law Research
Volume 20, Issue 2 - Serial Number 50
February 2020
Pages 611-632

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History

  • Receive Date: 10 November 2019
  • Revise Date: 08 April 2019
  • Accept Date: 18 February 2020

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