Document Type : Research Paper
Authors
1 Student
2 Allameh Tabatabaei University
3 Dana Energy
Abstract
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.
Keywords
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