|
A Novel Approach to Financing Upstream Oil and Gas Projects: Legal and Administrative Developments
|
Mohammadmahdi Hajian *   |
|
|
|
Abstract: (24 Views) |
Reserve-Based Lending (RBL) is one of the most widely used financing methods for upstream oil and gas projects. As a hybrid of project finance and corporate finance, this mechanism enables the contractor to utilize the proven reserves covered by an upstream petroleum contract as the underlying basis for financing. By recognizing such reserves as part of the contractor’s asset base and pledging them as collateral, the contractor may obtain financing for project development. The identification, classification, and valuation of proven and probable reserves involve complex technical, financial, and legal considerations.
In Iran, however, this widely adopted financing mechanism has not been available because, under the country’s legal framework—particularly the Constitution—hydrocarbon reserves constitute part of the Anfal (public wealth) and therefore cannot be owned or pledged by contractors. Nevertheless, recent reforms in the structure of upstream petroleum contracts, particularly the introduction of the Financing Framework for Upstream Oil and Gas Contracts, have established mechanisms that closely resemble reserve-based lending. Under this framework, future project revenues constitute the principal basis for financing contractors. This approach is reflected in financial instruments such as Commodity Deposit Certificates, Payment Commitment Certificates, Future Revenue Payment Commitment Certificates, and the collateralization of goods, equipment, facilities, and constructed assets in the investor’s name. Collectively, these mechanisms represent an indigenized adaptation of reserve-based financing within Iran’s legal system. Through an analytical examination of this emerging approach, the present study identifies its underlying principles, legal foundations, and implementation requirements. It concludes that the recent legal and administrative reforms constitute a significant step toward improving financing mechanisms for upstream oil and gas projects in Iran |
|
| Keywords: Project Finance, Upstream Oil and Gas Contracts, Reserve-Based Lending (RBL), Financing Framework for Upstream Oil and Gas Contracts, Future Revenue Payment Commitment Certificate, Commodity Deposit Certificate, Reserve-Based Financing
|
|
|
|
|
Type of Study: Research |
Subject:
Special
|
|
|
|
|
|
|
| Add your comments about this article |
|
|
|
.jpg)
