PETROLEUM ACT
Article 1: Definitions
The following terms used anywhere in this Act, shall have the meanings and the definitions described to them in this Article:
Petroleum Resources: shall mean and comprise every one of the inland territorial divisions of land and waters and coastal and international waters and continental shelf where discovery of petroleum reserves is probable and petroleum reserves may be found, and their specific technical and geographical specifications have been determined by the Ministry of Oil.
Petroleum Operations: shall mean and comprise all the operations related to conservation, protection and exploitation of the petroleum resources such as research survey, geodesy, geological studies, exploration, drilling, operations, exploitation and production, acquisition of the required lands, preparation and execution of capital investment projects for erecting installations and industries, their development, expansion and renovation; custody, protection and safe-guarding of the units related to the oil industry. Also production and processing operations for rendering crude oil, gas and other hydrocarbons (except coal) marketable; refining crude oil and production of petroleum derivatives and by-products; gathering, treatment and production of natural gas and associated products; utilization of petroleum and gas derivatives and products for production of various petrochemical products; transportation, distribution, sale, and export of oil, gas and petrochemical products; commercial activities relating to the exports, imports and productions of oil, gas and petrochemical products; production and provision of industrial goods and materials used by the petroleum (oil) industry, establishment of the related incidental facilities and services for these operations and training and recruitment of the necessary expert personnel (workforce); provision of industrial safety and sanitation requirements and environment protection against pollution resulting from the operations by due observance of the criteria laid down by the organizations concerned; techno-economic reviews, design and planning activities, conclusion of construction, service and consultancy contracts in the fields of the above mentioned operations; carrying out scientific and technical studies, research and investigations for development and advancement of the technology and promotion of the level of technical and industrial know-how review of the innovations and inventions related to the oil industries and exchange of technical and scientific information and industrial experiences with the competent local and foreign institutes in the field of petroleum operations.
Where the scope of petroleum operations interferes with the lawful duties, plans and projects of other organizations, and organs of the Islamic Republic of Iran, necessary decision shall be adopted through the By-Laws to be prepared and made by the Ministry of Oil and approved by the Council of Ministers.
Operational Units: shall mean comprise any organization, institute or company who assumes liability for and carries out certain basic and subsidiary specialized and general operations and related incidental petroleum services.
Contract: shall mean and comprise contractual obligations (undertakings) concluded between the Ministry of Oil or an operational unit or any natural person or legal entity for carrying out and fulfilling a part of the petroleum operations in conformity with the laws and regulations of the Government of the Islamic Republic of Iran and on the basis of the provisions of this Act.
Article 2 The petroleum resources of the country are part of the public domain (properties and assets) and wealth and according to Article 45 of the Constitution (of the Islamic Republic of Iran) are at the disposal and control of the Government of the Islamic Republic of Iran and all installations, equipment, assets, property and capital investments which have been made or shall be made in future within the country and abroad by the Ministry of Oil and her affiliated companies, will belong to the people of Iran and remain at the disposal and control of the Government of the Islamic Republic of Iran.
The authority for exercising sovereignty and ownership right over the petroleum resources and installations is vested in the Government of the Islamic Republic of Iran which on the basis of the regulations, rights and powers prescribed in this Act shall be undertaken and executed by the Ministry of Petroleum in accordance with the general principles and policies of the country.
Article 3 Exertion of rights and powers prescribed in this Act shall be entrusted to the Ministry of Oil and affiliated companies and supervision over petroleum operations and other duties and functions mentioned in this act shall be undertaken by the Ministry of Oil.
Article 4 The Ministry of Oil can establish companies for execution and carrying out petroleum operations and exploitation throughout the country and continental shelf and marine areas. The Statutes of the National Iranian Oil, Gas and Petrochemical Companies shall be implemented upon approval thereof by the Islamic Consultative Assembly. The authority for approval of the Statutes of other companies shall be entrusted to the Council of Ministers.
Note The Ministry of Oil shall be under obligation to submit the Statues of the National Iranian Oil, Gas and Petrochemical Companies for approval to the Islamic Consultative Assembly within a one-year period from the approval date of this Act.
Article 5 Conclusion of important (major) contracts between the Ministry of Oil or petroleum operational units and the local and foreign natural persons and legal entities and
determination of the important (major) cases shall be subject to and governed by the By-Laws to be approved by the Council of Ministers upon the proposal of the Oil Ministry. The contracts concluded between the Ministry of Oil and other governments shall fully conform to Article 77 of the Constitution of the Islamic Republic of Iran.1
Article 6 All capital in vestments shall be proposed through the Ministry of Oil on the basis of the budget of the operational units and be included upon approval of the General Assembly, in the General State Budget. Foreign investment in these operations in any manner will not be allowed whatsoever.
Note In case of utilization of the public budget, the general government regulations shall be adhered to.
Article 7 The Ministry of Oil shall be under obligation to exert proper supervision and take due care, in the course of petroleum operations and through sound planning for conservation of the petroleum reserves, wealth and installations and prevention of environment pollution (air, water, earth) in coordination with the organizations concerned.
Article 8 All the fixed capital investments of the oil industry in the country shall be subject to and governed by the laws and regulations of the relevant unit and in cases where no specific law exists, they shall be governed by the general regulations of the Islamic Republic of Iran.
The capital investments put and those which in future shall be put at the disposal and control of the Petroleum Operational Units will be regarded as the properties of the said Units. However, any transfer of such properties shall be contingent upon the permit of the Oil Ministry.
Article 9 For protection and safe custody of the petroleum resources and installations, properties and documents of the oil industry, the Ministry of Oil shall be required to establish in place of the Oil Industry Guard, a unit in the name of security guard (Harasat) in coordination with the Interior Ministry and in cooperation with the police and security forces. The relevant executive By-Laws shall be prepared by the Oil and Interior Ministries and approved by the Council of Ministers.
Note The establishment cost of the Security (Harasat) Unit shall be met and provided out of the credits (budget) of the Oil Industry Guard.
Article 10
The Ministry of Oil shall be under obligation to exert regular and consistent efforts for recruitment and training of the necessary personnel and gaining access to advanced technologies and growth and development in various fields of the oil industry through appropriate ways and means in coordination and conformity with the policies of the Ministry of Science and Higher Education by preparation of appropriate educational programmes and creation of training centers and establishment of research and laboratory complexes and shall take appropriate measures for promotion of the level of knowledge and scientific and practical information of the employees and experts and creation of an appropriate atmosphere and environment for attraction and encouragement of the competent devoted and expert individuals.
Article 11 The lands and improvements and any type of building, water and easement rights required for petroleum operations shall be acquired in accordance with the Statutes of the National Iranian Oil and Gas and Petrochemical Companies to be approved by the Islamic Consultative Assembly.
Article 12 Any law and regulation contrary to this Act shall be abrogated and stand null and void by approval of this Act.
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AMENDMENT ON THE PETROLEUM ACT
Article 1- Article 1 of Petroleum Act ratified on 10/1/1987, which is called “Act” hereafter, is amended as follows:
Article 1- The following terms used in this Act, shall have the meanings and definitions ascribed to them under this Article:
1- Petroleum: Hydrocarbons in the form of crude oil, condensates, natural gas, bitumen (tar), oil shale and sands found in a natural condition or produced through upstream activities.
2- Natural Gas: Hydrocarbons existing in independent gas structures, gas anticlines or dissolved in oil, under normal circumstances as gas, or produced through upstream activities.
3- Petroleum Resources: Any subsurface or surface resource or reservoir in the territorial administrative districts, inland waters, coastal zone, continental shelf and international waters adjacent to country’s borderline and international high sea, in which existence of petroleum is likely and technical specifications and geographic coordinates of which would be determined by Ministry of Petroleum.
4- Upstream Petroleum Activities: It includes all studies, activities and actions with respect to exploration, drilling, operation and conservation of petroleum resources, its transportation, storage and exportation such as research survey, mapping, geological and geophysic and geochemistry studies, drilling and technical services of wells, injection of gas, water, air (gas lift) or any activity leading to IOR/EOR from oil resources and also installation and development of related facilities and industries, delineation of borders, and protection of their security for production and processing of petroleum in the extent of first separation, exportation, utilization or provision for downstream activities.
Instances such as management and supervision on provision of industrial goods and materials and recruiting human resources, maintenance of HSE conditions and carrying out all necessary activities in order to improve and transfer technology for supporting the abovementioned activities, are all considered as upstream activities.
5- Downstream Petroleum Activities: It covers all studies, activities and actions with respect to refining activities in refining facilities in order to produce petroleum products and utilizing them for producing petrochemical products; and transfer, storage, distribution, domestic sale, exportation and importation of petroleum and petrochemical products.
Instances such as management and supervision on provision of industrial goods and materials and recruiting human resources, maintenance of HSE conditions and carrying out all necessary activities in order to improve and transfer technology for supporting the abovementioned activities, are all considered as downstream activities.
6- Operational Units: Any unit, organization, institution or company which carries out upstream or downstream activities as primary, subsidiary, specialized, public and consultation services, according to pertinent laws and regulations.
7- Production in compliance with MER [Maximum Efficient Rate]: All activities that lead to enhanced recovery rate and maximum commerciality of production from country’s oil and gas resources during their lifetime which would avoid waste of resources in the oil production lifecycle, based on the ratified policies.
8- Oil products: All products produced in oil processing and refinery facilities and can be either directly used or processed into final product in other operational and petrochemical units.
9- Petrochemical products: All products produced in petrochemical facilities from oil and oil products and can be either directly used or used in order to produce final product in operations.
10- Final Products: Products that may not produce other products and may be directly used after production.
11-Oil transfer: All activities and actions that are carried out in order to transfer exploited or extracted oil the from oil resources to processing and refinery facilities and export terminals. This definition includes oil transfer from import points to refinery and petrochemical facilities.
12- Transfer of oil products: All activities and actions carried out in order to transfer oil products from processing facilities, import points and main warehouses and, distribution points, petrochemical facilities or export terminals.
13- Pipelines: All lines through which oil resources are transferred, through pipes, to refinery and petrochemical facilities or export and import points and also lines of transferring oil and petrochemical products to main warehouses and domestic distribution points and export terminals.
14- Oil, Oil products, and Petrochemical Products Trade: shall be ascribed to marketing activities and actions, pricing and conclusion of contracts of sale, export and import, transfer(transit), and exchange of oil, oil products, and petrochemical products.
15-Oil and Oil products storage: All activities and actions, related to storage and recovery of oil, oil and petrochemical products in surface metal, concrete, subsurface containers, including but not limited to, stone and salt caverns and abandoned reservoirs and mines, that are carried out to deliver provision of input of refinery and petrochemical units to export terminals, in order to prevent stoppage of operational units activities, enhancement of oil and oil products quality and making balance between production and consumption.
16- Oil Contract: Bilateral or multilateral agreement signed, in conformity with statutes and laws, between Ministry of Petroleum or any main affiliate companies of the ministry or any operational unit with one or several operational units or natural or juridical persons inside or outside the country, according to which carrying out all or part of upstream and downstream activities or trade of oil, oil product and petrochemical products are undertaken.
17- Sovereignty Affairs in Petroleum Industry: It means application of sovereignty right and public ownership by I.R. of Iran over oil resources and policy making, planning, control and management and supervision on activities carried out in petroleum and petrochemical industry, including upstream and downstream activities.
18- Main Affiliate Companies of Ministry of Petroleum: National Iranian oil, gas, petrochemical and refinery and distribution of oil products as affiliates of Ministry of Petroleum.
19- Subsidiary Affiliate Companies of Ministry of Petroleum: Companies with more than 50% shares belonging to Main Affiliate Companies of Ministry of Petroleum.
Article 2- Article (2) of Act is amended as follows:
Article 2- All oil resources are public property. Ministry of Petroleum is responsible on behalf of Islamic Government for application of sovereignty right and public ownership over the abovementioned resources.
Article 3- Article (3) of Act is amended as follows
Article 3- “Supreme Board of Supervision on Petroleum Resources” is responsible for supervision over application of sovereignty right and public ownership on petroleum resources. This Board is founded by virtue of this Law and has the following members:
- Petroleum Minister as secretary general of the board
- Planning and strategic supervision vice-president
- Minister of commercial and treasury affairs
- General Head of I.R. of Iran Central Bank
- Head of Energy Commission in Islamic Consultative Assembly
- Head of Planning and Budget and Accounting Commission in Islamic Consultative Assembly
- Attorney General
- Two vice-presidents of Ministry of Petroleum
Note 1- All members of the board, have the right to vote.
Note 2- Board meetings can conduct business with a quorum of 7 members and attendance of Attorney General and one of the abovementioned commissions is necessary.
Note 3- Decisions of this board is final with votes of absolute majority of attendees.
Article 4- Article (7) of Act is amended as follows:
Article 7- Responsibilities of Supreme Board of Supervision are as follows:
- Supervision over application of General Policies under Article 44 of Constitution, the General Policies ratified on 1/28/2011 and its next amendments in oil and gas industry
- Examination and Assessment of application of strategic policies and programs ratified by Ministry of Petroleum during the process of preserving oil and gas resources in order to achieve enhanced recovery and maximum commercial added value from these resources
- Examination and assessment of text, financial volume, obligations, production amount and implementation time of important oil and gas contracts to preserve the produced revenue from public property in oil and gas industry, as well as, feasibility of contract implementation
- Preparing annual report and providing it to the Supreme Leader and Islamic Consultative Assembly
Note- Procedures of formation and moderation of meetings of “Supreme Board of Supervision over oil resources” is subject to a guideline that would be approved and ratified by Board of Ministers upon proposal from Ministry of Petroleum at most 3 months after notification of this Law.
Article 5- The following article is added to Law as article (12):
Article 12- In order to implement and effectuate investment projects and financing current expenses of Petroleum Industry, a percent of produced crude oil, natural gas and gas condensates value, which is stipulated in annual budget laws of country, would be allocated to Ministry of Petroleum through related Main Affiliate Companies, in order to pay the expenses according to laws and statutes.
Article 6- The following article is added to Law as article (13):
Article 13- A percent of revenues obtained through exporting crude oil, gas condensates and natural gas, is allocated to provide financial resources for infrastructures of country after deducting value of the imported gas. The percentage and method of utilizing these revenues is determined according to annual planning and budget laws of the country.
Article 7- The following article is added to Law as article (14):
Article 14- All revenues resulting from sale of crude oil, natural gas and gas condensates, would be paid within the budget law framework, directly to the Country’s Treasury at Central Bank after deduction of buyback payments, and the percentages stipulated in articles 5 and 6 of this law, would be taken and paid according to related laws and regulations.
Note 1- Upon announcement of Country’s Treasury, revenues resulting from produced gas condensates would be totally handed over to Ministry of Petroleum through Main Affiliate Companies on the account of its share of revenue, stipulated in article (5), after money transfer to central bank account and deduction of related legal taxes.
Note 2- Revenues resulting from sale of crude oil and gas condensates above prices stipulated in annual budget laws of country would be paid to the foreign currency account of central bank after
deduction of related taxes, according to the planning [and budget] law, in order to be allocated according to laws and regulations.
Article 8- The following article is added to Law as article (15):
Article 15- Ministry of Petroleum and affiliate companies shall confidentially provide Islamic Consultative Assembly with one copy of signed contracts with respect to natural gas and LNG exportation and exploration and development of oilfield contracts which include obligations for a duration exceeding 5 years.
Article 9- Article (12) of Law is modified as article (16) as follows:
Article 16- from the ratification date of this law, Petroleum Act ratified in 7/30/1974 is revoked.
The above Law comprising 9 Articles and 2 Notes was ratified by the Islamic Consultative Assembly in its public meeting on Saturday, June 12th, 2011 and endorsed by the Guardians Council on June 22nd, 2011.
Ali Larijani - Head of Islamic Consultative Assembly
Source URL: https://www.ilbconsultancy.com/insights/2011-Amendment-on-Iran-Petroleum-Act Links
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