IPC as Security for Financial Facilities
Date: 12 June 2019
On May 7, 2019, the Central Bank of Iran circulated a directive instructing Iranian banks to admit the “upstream development and production operations service contracts” for oil and gas fields, also known as IPC, concluded between National Iranian Oil Company and qualified local E&P companies and the long-term sale and purchase agreement for the proceeds arising out of such contracts as security for loans and financial facilities granted to qualified local E&P companies. The mandate in general was stipulated under the latest Iranian Budget Act.
The Budget Act further provides that the Iranian banks are authorized to grant financial facilities in both Iranian Rials and foreign currencies to all private investors, who invest in upstream oil and gas projects, specifically joint fields, flare gas recovery, and enhanced oil recovery methods. All Iranian government-owned and private banks including Iran-Venezuela Bi-National Bank as well as non-bank credit institutions fall within the scope of the mandate.
While the directive does not clarify whether its application also extends to contracts signed with a joint venture of qualified local E&P companies and an International Oil Company, it has called upon all banks and institutions to elaborate and notify the details of the implementation of the directive. The Iranian Ministry of Petroleum has so far approved 17 Iranian firms as qualified E&P contractors. The List includes:
Elite Pars will closely monitor all developments in Iranian oil and gas sector and will prepare further updates once adequate details are available as to the implementation of the directive.