Contractual framework of decommissioning of petroleum facilities and equipment

After exploration and production operation in an oil or gas field comes to an end, decommissioning of facilities and installations becomes inevitable. Difficulty of this process results from unprofitability of the field and duty to financing the decommissioning costs at the same time. This fact that the decommissioning process starts when the field is unproductive, falls host states and international oil companies in vague conditions in respect of decommissioning costs. Unlike many developed countries, in oil exporting countries such as Iran, there is no suitable legislative framework for dealing with the different aspects of decommissioning process. For this reason, the contractual terms are used to cover this deficiency. This article, first examines contractual arrangements governing decommissioning process and rights and obligations of each party in this area and then analyses the Iranian oil contracts in compliance with examined arrangements.