Another obstacle is Iran"s new model oil contract. Iran"s oil ministry took more than two years to draft the new model, which continues to face political opposition from conservative hardliners.
Up until now, investors have operated under short-term, fixed-fee contracts called buybacks that give them no share in the profits.
The new system allows foreign oil majors to form joint ventures with Iranian companies and participate in production activity. They were previously limited to exploration and development. The change gives foreign firms the opportunity to improve ultimate recovery and reap higher returns by coordinating early stage output and using advanced methods to squeeze oil and gas from maturing fields.
While the new contract structure looks more favorable, it is studded with caveats.
The state is encouraging local partners to put up 25 percent of the investment, but there are few Iranian companies capable of doing so, according to Scott Modell, managing director at The Rapidan Group and a former CIA officer.
These partners are likely to offer oilfield services to compensate, but international firms prefer to use their own service companies, not only because they believe they"re more capable but to avoid dealing with bureaucracy, corruption and sanctioned Iranian entities, he added.
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