Concession Contracts Concessions were among the oldest type of oil contracts in Iran which started with Darsi contract (1901). The 1933 contract was signed after finalization of the said concession and was valid until the oil nationalization in Iran. According to those contracts, the party to the contract held exclusive rights over Irans hydrocarbon resources in southern provinces and the government received part of revenues earned through development of those resources, but had no say on the implementation of the contract. The contractor was also obliged to meet domestic need to oil at discounted price. The company would give installations that it had built according to the contract to Iran at the end of the work and unskilled manpower was provided by Iran. Of course, the 1933 contract had considered conditions for training Iranian staff and employing them in oil industry. Consortium Contract was a modality of concession contract which was signed in 1954 between Iran and a consortium comprising the American Standard New Jersey, Standard California, Soconi, Gulf Oil, and Texas; Anglo-Iranian Oil Company, the Royal-Dutch Shell, and French Oil Company. According to that contract, Dutch companies which had been registered according to the Iranian law and whose articles of association had been confirmed by the Iranian government took charge of oil exploration, production, refining and sales through guarantee of other members of the consortium. The produced oil was sold to trade companies representing each member of the consortium and the two sides then agreed that the government should receive a fixed share of sale price instead of tax and consortium should be exempt from paying tax on stock dividend and customs duties. Today, a new type of concession contracts are practiced in England, Norway and the Netherlands according to which those countries give concession for exploitation of their hydrocarbon resources to contractor through signing concession contract with an oil company. However, they take 85-90 percent of subsequent profits as tax. It should be noted that in such countries, oil only accounts for a small part of their revenues and if concession holder refrained from production and sale of crude oil, their revenues would not be affected much. But in a country like Iran where oil accounts for more than 80 percent of state revenues, giving exclusive right for production and development of oil sources to any legal or real entity will mean giving control of the country to that entity. The constitution of the Islamic Republic of Iran and even Oil Act approved in 1951 have totally negated granting exclusive rights to foreigners for exploiting Irans underground hydrocarbon resources. Sharing Contracts Sharing contracts constitute another form of common contracts of global oil industry. Three such contracts were signed in Iran between 1957 and 1958, according to which, the government received 50 percent of produced oil in addition to income tax. Six more sharing contracts were signed in 1965 and contractors accepted the risks as well as the costs of exploring Irans oil reserves. The government claimed income tax, 50 percent of produced oil, royalty and cash (at the time of signing contract) and exploitation sums (in return for production in excess of contracts stipulation). Three last sharing contracts were signed in 1971 and, in addition to previous sums; royalty was deducted from the foreign contractors share. According to those contracts, joint stock companies which were formed with equal stakes for Iran and foreign contractor took charge of exploration, development and exploitation of hydrocarbon fields. In most such contracts, joint companies lacked an independent legal entity and were run on a non-profit basis. Sharing contracts in Iranian oil industry were defined in such a way that government was not the sole decision-maker and Irans sovereignty over hydrocarbon resources was practically weakened. Even now most international companies seek sharing contracts because value of their stocks is calculated according to oil reserves controlled by them; so that, they could boost the value of their stocks through sharing ownership of underground resources and registering them in their own name. After the victory of the Islamic Revolution, signing such contracts was constitutionally forbidden. The right of foreign company in determining production from a field, which weakens governments sovereignty, was the main reason for this decision. Of course, willingness of companies to share in hydrocarbon resources without having a say on the amount of production has led to emergence of new types of such contracts, but since such contracts are long-term and signed for a period of 20-25 years, they entail their own risks. Service Contracts Service contracts with accepting risks are the only form of oil contracts adopted by Irans oil industry during pre-revolution years. In most of those contracts, the contractor was responsible for accepting the risk of exploration and changing prices. Of course, if viable reserves were discovered, the contractor was in charge of selling the resultant oil for a long time. Three such contracts were signed between 1966 and 1968 according to which the government owned oil and all related installations and equipment. Exploration, development and exploitation costs were covered through selling crude oil discovered by contractor. Six more service contracts were signed in 1974 with Agip S.P.A., Pan-Canadian Petroleum Company as well as two other companies. The contract was implemented by the main contractor which was also in chare of exploration in the area. In case of oil discovery, the contractor took steps for development and exploitation. Oil Contracts after Victory of the Islamic Revolution A new form of service contracts was adopted after victory of the Islamic Revolution, which aimed at financing projects and technology transfer for the implementation of upstream oil projects. The contracts, known as buyback contracts, were adopted for the first time in the Second Economic Development Plan. Special method considered for repayment of costs of oil exploration, distinguished such contracts from their predecessors, which was a new experience for the Iranian and even the global oil industry. They led to interaction with foreign investor for implementing major development plans of various oil fields. According to this method, contractor is responsible for financing and implementing the project up to production stage as well as provision of machinery and technical equipment and employment of needed specialists and subcontractors. The National Iranian Oil Company, as representative of the Iranian government, will also sign other contracts with contractor such as sale agreement for long-term selling of crude oil according to which all costs undertaken by contractor as well as risk premium will be paid through selling the fields products up to a ceiling of about 60 percent of the fields production. The contractor, therefore, has no ownership rights over oil reserves or production. When operations are over, the contractor should deliver the developed field along with all equipment, installations, as well as technical, financial and contractual records back to National Iranian Oil Company and, therefore, it will have no right or control a to production from the field. Development of oil fields through buyback deals will take 3-5 years and repayment period for investment has been considered at 7-9 years on average. Contractors have gradually accepted other limitation including making the most of domestic capabilities, training Iranian staff and receiving bonuses or paying fines in case of any contractual breach. Such contracts not only realize Irans sovereignty over hydrocarbon fields, but also give the government full control over what contractors do. Other goals include attraction of needed foreign capital, technology transfer as well as maximum use of domestic contractors. Critics, however, believe that such contracts fail to realize the countrys interests in terms of technology transfer and short period of buyback deals has dissuaded contractors from being serious about increasing recovery factor of oil fields and optimal production from oil and gas reservoirs. Therefore, we must improve laws and find new mechanisms to replace such contracts to make sure about technology transfer and its use in management of oil and gas fields. Studying various contractual methods used internationally is needed in this regard; so that, if one contractual method failed in attracting foreign capital and realizing the said goals, we could use another method. Buyback deals were drawn up in line with special conditions governing Iranian oil industry over the past years and adjusting them to get them closer to common contracts signed in global oil industry is not incompatible with their nature because no unchangeable legal standard has been defined for such contracts. Oil industry specialists believe that other factors such as making the most of domestic facilities and capabilities; optimizing executive, management, control and supervision methods; boosting recovery factor of oil and gas reservoirs; and more profitability of such contracts for the country should also be taken into account. The main point that all analysts have agreed upon is preventing foreign control and dominance over hydrocarbon resources of the country.