OMV unhappy with Iranian oil contracts and talks over debt sour outlook

Austrian oil company had signed memorandum of understanding with Iran after sanctions were lifted but says not enough has been done to justify further moves.

Rainer Seele, the chief executive officer of OMV, says talks with Iran over potential investments have not succeeded so far and with bills yet to be paid to the company, the Austrian firm is unwilling to do deals. Lisi Niesner / BloombergShow less

Iran’s oil contracts are not yet fit for the Austrian energy group OMV to invest in planned projects in the country, which hopes foreign investment will revamp its ageing oil infrastructure, OMV’s chief executivesaid on Wednesday.

In May, four months after most international sanctions against Iran were lifted after it agreed to shrink its nuclear programme, OMV signed a memorandum of understanding with the National Iranian Oil Company for several projects there.

The OMV chief executive Rainer Seele said talks to fine-tune a model contract for international oil companies have not been successful yet.

“This process is still ongoing, this is taking quite a long time ... We have not yet defined a clean framework for the projects that are interesting for us,” Mr Seele said when asked how long this might take.

“We can make an investment decision only when we really know what the framework and the conditions are.”

OMV’s envisaged projects are in the Zagros area in western Iran, including the Cheshmeh Khosh and Band-E-Karkheh fields where OMV had started operations in 2001, and the Fars field in the south.

Iran’s cabinet on Wednesday approved a draft for the country’s new oil and gas contracts that includes 150 changes to a previous model contract, the state broadcaster IRIB said.

Another hurdle for OMV to start injecting fresh money into Iran, which needs US$200 billion to return to pre-sanctions output levels, is an outstanding debt Iran owes OMV to reimburse it for past appraisal and exploration activities.

“If you owe me money and you’re not giving it back to me and then want to proceed with me in the future, would you think that’s a good combination?” Mr Seele said of the debt linked to OMV’s activities before international sanctions were imposed on Iran in 2006.

“We are in intensive talks [about this] that have not yet achieved their objective.”

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