Iran agrees fresh oil contract

Iran, fresh from an Organization of the Petroleum Exporting Countries (Opec) meeting where it won significant concessions from regional rival Saudi Arabia, accelerated the rejuvenation of its sanctions-ravaged energy industry yesterday when the state producer signed a new-model oil investment contract.

National Iranian Oil agreed to the framework of a $2.2bn deal with Persia Oil & Gas Industry Development to boost output at three fields along the country’s western border with Iraq, said oil minister Bijan Namdar Zanganeh.

A second contract will be signed with a local company today.

Mr Zanganeh has said the new type of contract, designed to better reward investment in crude and natural gas production, is crucial to increasing the country’s long-term export potential.

Although it may take years for new investment deals to bear fruit, yesterday’s signing caps a good few days for Mr Zanganeh, who returned from last week’s Opec meeting in Algiers having secured Iran’s right to pump more oil even as Saudi Arabia and its Gulf Arab allies agreed to curb output.

President Hassan Rouhani’s government had argued that it should be allowed to return production to levels achieved before sanctions curbed shipments.

“Iranians feel that they’ve missed out on a big, big party because of sanctions,” said Francisco Blanch, head of commodities research at Bank of America Merrill Lynch.

“Sanctions basically took a lot of production out at a time when oil prices were very, very high. Iran doesn’t really have to cut production, and it’s going to get a higher price.”

The prospect of higher oil – benchmark prices in London traded at a three-month high above $50 a barrel on Monday — coupled with increased investment in the energy industry will also be a boost to Rouhani, who faces a re-election battle next year when he must convince voters that rapprochement with the West is paying off economically.

Oil traded near a four-month high, yesterday, as investors look ahead to next month’s Opec meeting and as Hurricane Matthew threatened to disrupt fuel shipments along the US east coast.

Opec agreed to trim supply for the first time in eight years last week.

Quotas will be decided at the group’s official meeting in Vienna at the end of November. Brent crude was up 13c at $51.02 a barrel.