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Iran's "Oil Show" Just Revealed a Huge Opportunity

Let's face it: Iran isn't at the top of anyone's list when considering all the profit opportunities out there in the world. At least, not yet…

You see, Iran is changing – and quickly.

Its new political regime at least appears to be increasingly open to the West.

Its old-style buyback contracts with international oil companies have long been considered high-risk with little or no flexibility; they essentially allowed Iran to own the oil company assets and allow the company a stream of profit.

But the isolated nation recently announced the introduction of a new generation of oil contract, one that promises to be considerably friendlier to foreign partners.

Companies with a long history in the Middle East are already well-positioned for the change.

And, with the play I'm about to show you, you can be the first to profit.

The IPC: A (Very) New Game in an Old Oil Market

Thanks to a decade of sanctions, Iran lost many of its international oil markets to other OPEC members who've been more than happy to pick up the slack.

Economic embargos against the country's nuclear program have taken their toll and are partly responsible for Iran's currency, the rial, losing nearly 70% against the U.S. dollar in the past five years. That's sent inflation soaring and caused considerable suffering with a surging cost of living.

But there's been somewhat of a rapprochement lately. Iran's olive branch is a new oil agreement called the Integrated Petroleum Contract (IPC).

The IPC should be formally unveiled in London later this year. It's expected to allow for the transfer of ownership of hydrocarbons (though not project assets) to the foreign investor at predetermined milestones. For years the United Arab Emirates and Iraqi Kurdistan have successfully exploited their oil fields with production-sharing agreements of this type.

In early May, Iran held an "Oil Show" that was attended by more than 600 foreign companies. Delegates came from Europe, the U.S., China, Russia, Japan, South Korea, Malaysia, Turkey, and the United Arab Emirates.

Iran is telling oil producers to "be ready" for upcoming work as contract terms are updated. Some are taking the advice to heart.

The Likely First-Mover

Based in France, Total SA (ADR) (NYSE: TOT) is the world's fifth-largest public integrated oil company. Thanks to its European roots, the company has long had operations in many highly productive regions, like Africa and the Middle East, and could be a "first-mover" as Iran opens up.

With a market cap of $139 billion, a P/E of 12, and a current yield of 4.7%, Total has plenty of upside in the tank. And CEO Christophe de Margerie recently indicated that, if sanctions are lifted, he sees the potential for his company to return to producing oil in Iran.

The country needs partners like Total because decades of limited investment and aging technologies have weighed profoundly on output.

Unlike Myanmar or Africa, both more recent destinations for oil and gas exploration and production, Iran has one of the world's most mature oil sectors, with production dating back to 1908.

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About the Author

Peter Krauth is the Resource Specialist for Money Map Press and has contributed some of the most popular and highly regarded investing articles on Money Morning. Peter is headquartered in resource-rich Canada, but he travels around the world to dig up the very best profit opportunity, whether it's in gold, silver, oil, coal, or even potash.

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