Business: Break in the Pattern

By a unanimous vote, Iran’s Senate last week ratified an oil pact that was a major break in the traditional fifty-fifty profit split that Middle Eastern governments give foreign prospectors. To Italy’s state-run ENI and its ambitious boss. Enrico Mattei, Iran granted twelve-year drilling concessions for a strip on the Gulf of Oman, a submerged area off Abadan, and a promising 6,800-sq.-mi. area south of the fabulous Qum find (TIME, May 6). But to Iran ENI gave up to 75% of the profits from any oil find it may make.

Though Iran still claims that “the principle of sharing profits fifty-fifty between partners has been respected.” it will get its extra 25% by bringing the state-run National Iranian Oil Co. (NIOC) in as an equal partner with Italy’s ENI. From any profits, the Iranian government will skim a 50% royalty off the top; then the remaining 50% will be divided equally between ENI and NIOC. In addition, ENI will ante up NIOC’s initial contribution to the joint company on a “loan” basis, pump another $22,250,000 into the venture over the next twelve years.

To most Western oilmen ENI’s largess was a power play to crash Italy into the big leagues of Middle East oil. Probably no major Western company will be as free-handed in future contracts with oil-rich Iran. Even so, the ENI deal is a significant break in the fifty-fifty pattern. The government will press for NIOC participation in future oil deals, and an

Iranian oil law passed this month specifies that the state company must hold a 30% interest in any joint venture, assuring Iran of at least a 65% slice of the profits. Like it or not, Iran has so much promising oil land that at least two U.S. companies are now considering moving into Iran to explore under the terms of the new law.