In oil contracts involving exploration activities, the determination of a field’s commerciality is a critical and complex issue that significantly influences the decision to advance to development and production stages. This study provides a comprehensive legal and economic analysis of field commerciality and proposes a refined framework for drafting oil contracts. Employing a descriptive-analytical and comparative methodology, the research draws on documentary sources and examines contracts from multiple countries. The study first delineates the technical, legal, and economic aspects of commerciality. It then revises the conventional Net Present Value (NPV) model by incorporating two often overlooked parameters: the intrinsic value of un-extracted subsurface resources and the environmental impacts of the project as hidden costs. The research further emphasizes the necessity of establishing clear, quantifiable criteria for assessing commerciality, clarifying the authority responsible for its determination, and introduces innovative contractual provisions such as the possibility of renegotiation at the conclusion of the appraisal period. Findings suggest that precise and quantitative commerciality criteria can mitigate contractual disputes and safeguard the host country’s interests against investment risks.
Samavati,A , Hajian,M M , Taklif,A and Ghorbani,E . (2025). Legal and Economic Analysis of Commercial Declaration in Oil and Gas Upstream Contracts. (e19887). Iranian Energy Economics, (), e19887 doi: 10.22054/jiee.2025.89022.2176
MLA
Samavati,A , , Hajian,M M , , Taklif,A , and Ghorbani,E . "Legal and Economic Analysis of Commercial Declaration in Oil and Gas Upstream Contracts" .e19887 , Iranian Energy Economics, , , 2025, e19887. doi: 10.22054/jiee.2025.89022.2176
HARVARD
Samavati A, Hajian M M, Taklif A, Ghorbani E. (2025). 'Legal and Economic Analysis of Commercial Declaration in Oil and Gas Upstream Contracts', Iranian Energy Economics, (), e19887. doi: 10.22054/jiee.2025.89022.2176
CHICAGO
A Samavati, M M Hajian, A Taklif and E Ghorbani, "Legal and Economic Analysis of Commercial Declaration in Oil and Gas Upstream Contracts," Iranian Energy Economics, (2025): e19887, doi: 10.22054/jiee.2025.89022.2176
VANCOUVER
Samavati A, Hajian M M, Taklif A, Ghorbani E. Legal and Economic Analysis of Commercial Declaration in Oil and Gas Upstream Contracts. Iranian Energy Economics. 2025;():e19887 (In Persian). doi: 10.22054/jiee.2025.89022.2176
