Challenges of the Legal Relationship between the Government and the National Iranian Oil Company in the Energy Transition

Rafiei, Mohammad Taqi; Atashi, Ali

doi:10.22059/jrels.2026.406728.612

Challenges of the Legal Relationship between the Government and the National Iranian Oil Company in the Energy Transition

Document Type : ISI

Authors

Mohammad Taqi Rafiei ¹

Ali Atashi ²

¹ Associate Professor, Department of Energy Law and International Trade, Faculty of Law, College of Farabi, University of Tehran, Qom, Iran.

² PhD Candidate of Oil and Gas Law, Faculty of Law, College of Farabi, University of Tehran, Qom, Iran.

10.22059/jrels.2026.406728.612

Abstract

Introduction
The global energy system is undergoing a profound structural transition driven by climate change, technological innovation, sustainable development imperatives, and geopolitical change. This transition extends beyond replacing energy sources and requires fundamental changes in energy production, distribution, consumption, and the legal and institutional frameworks governing the energy sector. For oil-dependent countries such as Iran, the challenge is twofold: maintaining short-term oil revenues while gradually reducing reliance on hydrocarbons and adapting governance structures to the demands of the energy transition. Within Iran, the legal relationship between the Government, as the owner of petroleum resources, and the National Iranian Oil Company (NIOC), as the principal executive entity of the hydrocarbon sector, forms the foundation of energy governance. Traditionally, this relationship has focused on maximizing oil production and export. However, the Seventh National Progress Plan, particularly its provisions on reforming the financial relationship between the Government and NIOC, represents an important step toward institutional reform. A key question is whether these reforms are sufficient to support the transition of NIOC from a conventional national oil company to a diversified energy group. Existing research has primarily examined either the traditional Government–NIOC relationship or the technical and economic dimensions of the energy transition, while the legal implications of the transition for this relationship remain underexplored. This gap is particularly significant because Iran's legal framework plays a decisive role in shaping energy governance, investment, and institutional adaptation. Accordingly, this article examines the legal challenges posed by the energy transition to the Government–NIOC relationship, evaluates the capacity of Iran's existing legal framework to address these challenges, compares the experiences of Norway, Saudi Arabia, and China, and proposes legal and institutional reforms for redefining this relationship in the era of the energy transition.

Methodology
This study adopts a descriptive-analytical legal research approach based on a review of relevant legislation, regulations, policy documents, and scholarly literature. It examines the legal framework governing the relationship between the Government of Iran and the National Iranian Oil Company, with particular emphasis on the Seventh National Progress Plan and related legislation, in light of the requirements of the energy transition. A comparative analysis of the experiences of Norway, Saudi Arabia, and China is also undertaken to develop recommendations for redefining this legal relationship during the energy transition.

Conclusion
This study demonstrates that the global energy transition has fundamentally challenged traditional hydrocarbon-based governance models and reshaped the legal relationship between the Government of Iran and the National Iranian Oil Company (NIOC) at the strategic, institutional, and contractual levels. Strategically, the conflict between NIOC's mandate to maximize oil production and the need to reduce dependence on fossil fuels remains the principal obstacle, compounded by the absence of a comprehensive legal framework defining national transition objectives and NIOC's future role. Institutionally, governmental control, dependence on oil revenues, and limited operational autonomy have constrained long-term investment in emerging energy technologies, while existing contractual frameworks remain unsuitable for renewable energy projects requiring long-term, risk-sharing arrangements. The comparative analysis of Norway, Saudi Arabia, and China suggests that transforming NIOC into an integrated energy group responsible for managing a diversified national energy portfolio is the most appropriate strategy for Iran. Accordingly, this study recommends enacting a National Energy Transition Law to establish measurable transition targets, redefine NIOC's mandate, and create an independent regulatory authority. It also proposes the effective implementation of Article 15 of the Seventh National Progress Plan, the establishment of an Energy Transition Investment Fund, and the adoption of modern energy contracts incorporating profit- and risk-sharing mechanisms together with environmental, social, and governance (ESG) obligations. Ultimately, Iran's successful energy transition depends on coherent legal and institutional reforms that transform NIOC into a leading energy institution capable of advancing sustainable development and strengthening the country's future energy governance.

Keywords

Energy transition

National Iranian Oil Company

Government

Seventh Progress Plan Law

Energy governance

Subjects

حوزه حقوق عمومی و محیط زیست در صنعت نفت و گاز

References

Batten, S. (2018). Climate Change and the Macro-economy: A Critical Review. Staff Working Paper, )706(, Bank of England, January. https://www.bankofengland.co.uk//media/boe/files/working-paper/2018/climate-change-and-the-macro-economy-a-critical-review.pdf (Accessed 10 September 2025)

Cameron, P. D., Mu, X., & Roeben, V. (2020). The Global Energy Transition Law, Policy and Economics for Energy in the 21st Century. Oxford, UK ; New York, NY Hart Publishing, an imprint of Bloomsbury Publishing.

Cherp, A., Vinichenko, V., Jewell, J., Suzuki, M., & Antal, M. (2018). Integrating techno-economic, socio-technical and political perspectives on national energy transitions: A meta-theoretical framework. Energy Research and Social Science, 37, 175–190. https://doi.org/10.1016/j.erss.2017.09.015

Cheong, T. S., Liu, S., Ma, N., & Han, T. (2025). The Impact of Public Environmental Concern on Corporate ESG Performance. Journal of Risk and Financial Management, 18(2), 82.

https://doi.org/10.3390/jrfm18020082

Christensen, S. A. (2024). Explaining State Ownership in Listed Companies in Norway. Enterprise and Society, 25(3), 907–932 doi:10.1017/eso.2023.19

Clark, G. L., & Monk, A. (2015). Institutional Investors in Global Markets: The Norwegian Government Pension Fund Global. Oxford University Press.

Colgan, Jeff D., & Hinthorn, M. (2023). International Energy Politics in an Age of Climate Change. Annu. Rev. Political Sci. Vol. 26:79-96 https://doi.org/10.1146/annurev-polisci-051421-124241

Constitution of the Islamic Republic of Iran. (1979, revised 1989) [In Persian].

Council of Ministers. (2025). Executive By-law of Paragraph (a), Article 15 of the Seventh Progress Plan Law (as amended). Official Gazette of the Islamic Republic of Iran [In Persian].

Council of Ministers. (2015). Resolution on the General Conditions, Structure, and Model of Upstream Oil and Gas Contracts (as amended). Official Gazette of the Islamic Republic of Iran [In Persian].

Downs, E. (2021). Green Giants? China’s national oil companies prepare for the Energy Transition. Center on Global Energy Policy.

https://www.energypolicy.columbia.edu/wpcontent/uploads/2021/09/ChinaNOCs_CGEP_Report_111122.pdf (Accessed 15 September 2025)

Ebrahimi, S. N., & Jafari Chaleshtari, M. (2015). Legal Analysis of Monopoly and Competition in the Energy Market with Emphasis on the Gas and Electricity Industries: Challenges and Opportunities. Private Law Studies Quarterly, 45(3), 361–378 [In Persian]. https://doi.org/10.22059/jlq.2015.55024

EITI. (2024). Beyond the fine print: Disclosing petroleum contracts to manage risks and opportunities in the energy transition. EITI Policy Brief. (Accessed 12 September 2025)

https://eiti.org/sites/default/files/202410/EITI%20Policy%20brief_Petroleum%20contracts%20in%20the%20energy%20transition.pdf

Energy Governance Think Tank (2021). The Third Conference on the Political Economy of Environment and Energy in Iran. Ministry of Energy, Center for Social Affairs of Water and Energy Resources [In Persian].

Equinor. (2023). Annual report and Form 20-F 2023. https://www.equinor.com/investors/financial-reporting/annual-reports.html (Accessed 15 September 2025)

Fattouh, B., & Poudineh, R. (2020). The rise of renewables and energy transition: What adaptation strategy for oil-exporting countries?. Oxford Institute for Energy Studies. (Accessed 12 September 2025) https://www.oxfordenergy.org/wpcms/wpcontent/uploads/2018/05/The-rise-of-renewables-and-energy-transition-what-adaptation strategy-for-oil-companies-and-oil-exporting-countries-MEP-19.pdf

Fouquet, R. (2016). Path dependence in energy systems and economic development. Nature Energy, 1(8), 1–8.

https://doi.org/10.1038/nenergy.2016.98

Geels, F. W., Sovacool, B. K., Schwanen, T. & Sorrell, S. (2017). Sociotechnical transitions for deep decarbonization. Science, 357(6357), 1242–1244. https://doi.org/10.1126/science.aao3760

Gasparini, M. (2023). Norway’s opportunities via the Sovereign Wealth Fund and the European Green Deal. ResearchGate. 1-12

DOI:10.1080/00207233.2022.2037335

Goudarzi, Z., & Rostami, V. (2019). An Analysis of the Revenues of the National Iranian Oil Company and the Governing Legal Framework. Energy Law Studies, 4(2), 517–545 [In Persian].

https://doi.org/10.22059/JRELS.2019.251752.182

Guo, Y., Yang, Y., Bradshaw, M., Wang, C. & Blondeel, M. (2023). Globalization and decarbonization: Changing strategies of global oil and gas companies. Wiley Interdisciplinary Reviews. Climate Change, 14(6), 1- 21. Article e849. https://doi.org/10.1002/wcc.849

Hartley, P. R., & Medlock, K. B. (2013). Changes in the Operational Efficiency of National Oil Companies. The Energy Journal, 34(2), 1–20. http://dx.doi.org/10.5547/01956574.34.2.2

Heffron, R. J. Ronne, A. Bradbrook, A. Tomain, J. P. & Talus, K. (2018). “A Treatise for Energy Law. Journal of World Energy Law and Business 34–48. https://doi.org/10.1093/jwelb/jwx039

Holechek, J.L., Geli, H.M.E., Sawalhah, M.N., & Valdez, R. (2022). A Global Assessment: Can Renewable Energy Replace Fossil Fuels by 2050?. Sustainability, 14, 4792. https://doi.org/10.3390/su14084792

Institute for International Energy Studies (IIES). (2025). Adaptation Strategies of Oil-Exporting Countries in the Era of Energy Transition [In Persian].

International Energy Agency (IEA). (2022). Norway 2022 Energy Policy Review. 1-147 (Accessed 12 September 2025) https://www.oecd.org/content/dam/oecd/en/publications/reports/2022/08/norway-2022-energy-policy-review_8dd73551/7411c642-en.pdf

International Energy Agency (IEA). (2021). Net Zero by 2050: A Roadmap for the Global Energy Sector. IEA. https://www.iea.org/reports/net-zero-by-2050 (Accessed18September 2025)

International Renewable Energy Agency (IRENA). (2023). World Energy Transitions Outlook 2023: 1.5°C Pathway. https://www.irena.org/publications/2023/Nov/World-Energy-Transitions-Outlook-2023 (Accessed 18 September 2025)

Karimizadeh, M. (2025). Political Fluctuations of the U.S. Dollar Make Inflation Control More Difficult. New Economic Trends, 85 [In Persian].

Kaschny, L., & Lavrijssen, S. (2023). The Independence of National Regulatory Authorities and the European Union Energy Transition. International and Comparative Law Quarterly , Volume 72 , Issue 3 , July 2023 , pp. 715 - 736

DOI: https://doi.org/10.1017/S0020589323000271

Kathiri, M. R. (2023). Strategic Issues of the Energy Sector in the Seventh Development Plan (3): Structural Reform of the Financial Relationship between the National Iranian Oil Company and the Government. Expert Reports Monthly, 31(5). Islamic Consultative Assembly Research Center [In Persian].

Kingdom of Saudi Arabia. (2016). Vision 2030. https://vision2030.gov.sa/en (Accessed 20 September 2025)

Korsnes, M. , Loewen, B. Fereng Dale, R., Steen, M., & Moe Skjolsvold, T. (2023). Paradoxes of Norway's energy transition. Claimate Policy, 23(9) 1132-1150. https://doi.org/10.1080/14693062.2023.2169238

Krane, J. (2019). Energy governance in Saudi Arabia: Policy tradeoffs and rentier dynamics. Center for Energy Studies, pp, 1–36. https://www.bakerinstitute.org/sites/default/files/201901/import/ces-pub-saudienergy-011819.pdf (Accessed 20 September 2025)

Law on the Annexation of Certain Articles to the Law Regulating Part of the Government's Financial Regulations (No. 2). (2014). Official Gazette of the Islamic Republic of Iran [In Persian].

Law on the Duties and Powers of the Ministry of Petroleum. (2012). Official Gazette of the Islamic Republic of Iran [In Persian].

Law on the Establishment of the National Iranian Oil Company. (2016). Official Gazette of the Islamic Republic of Iran [In Persian].

Lee, J., Serafin, A. M., & Courteau, C. (2023). Corporate disclosure, ESG and green fintech in the energy industry. The Journal of World Energy Law and Business, 16(6), 473-491. https://doi.org/10.1093/jwelb/jwad018

Maddahinasab, M., & Nankab, M. (2020). An economic analysis of Iranian petroleum contract. Petroleum Science, 17(7), 1451-1461. https://link.springer.com/article/10.1007/s12182-020-00486-2

Mahdavi, P., Muttitt, G., Monaldi, F., & Marcel, V. (2021). National Oil Companies and Climate Change: Insights for Advocates. 1-16. (Accessed 20 September 2025) https://www.researchgate.net/publication/356908021

Marcel, V. (2019). National Oil Companies of the Future. Annales des Mines - Responsabilité et environnement, 95(3):133 DOI:10.3917/re1.095.0133

Marcel, V. (2006). Oil Titans: National Oil Companies in the Middle East. Brookings Institution Press, Chatham House . ISBN-10: 0815754736 ISBN-13: 978-0815754732 (Accessed 20 September 2025)

Masumoto, R. (2024). Global Strategies of International Oil Companies and Their Activities in Indonesia under Energy Transition, Economic Research Institute for ASEAN and East Asia (ERIA), number 2024-RPR-19 edited by Shigeru Kimura, March. https://www.eria.org/uploads/Global-Strategies-of-International-Oil-Companies-and-Their-Activities-in-Indonesia.pdf

Mitchell, J., Marcel, V., & Mitchell, B. (2012). What Next for the Oil and Gas Industry?. 1-128 (Accessed 12 October 2025) https://www.chathamhouse.org/sites/default/files/public/Research/Energy%2C%20Environment%20and%20Development/1012pr_oilgas.pdf

Mohammed, K.S., Tiwari, S., Ferraz, D., & Shahzadi, I. (2023). Assessing the EKC hypothesis by considering the supply chain disruption and greener energy: findings in the lens of sustainable development goals. Environ. Sci. Pollut. Res., 30 (7) (2023). pp. 18168-18180. https://doi.org/10.1007/s11356-022-23351-8

Mousazadeh, E., & Barkhi, N. (2020). A Comparative Study of Ownership of Oil and Gas Resources in Iran and NAFTA Member States. Energy Law Studies, 6(1), 215–230 [In Persian].

https://doi.org/10.22059/jrels.2020.252271.184

Nikbakht Fini, H. R., Bagheri, M., & Ghorbani, E. (2019). A Comparative Analysis of the Buyback Contract Framework and the Iran Petroleum Contract (IPC) with Respect to Ownership Rights, Reserve Recognition, and Fiscal Regime. Energy Law Studies, 4(2), 547–570 [In Persian]. https://doi.org/10.22059/jrels.2019.245095.155

Norwegian Ministry of Energy (2022). An Energy Policy for Employment, Transition and security in times of uncertainty. https://www.regjeringen.no/en/id4/ (Accessed 08 September 2025)

Nouri Poushanlouei, J., & Barkhi, N. (2022). A Legal Analysis of the Comprehensive and Integrated Management of Iran's Oil and Gas Reservoirs. Energy Law Studies, 7(2), 453–475 [In Persian]. https://doi.org/10.22059/jrels.2022.320770.430

Onyema, E., & Saxena, A. (2025). The Energy Transition in Contractual Practice. ICSID Review - Foreign Investment Law Journal, Vol. 00, No. 00 (2025), 1–20 https://doi.org/10.1093/icsidreview/siaf004.

Osmel Manzano and Francisco M. (2008). The Political Economy of Oil Production in Latin America. Economía Journal, The Latin American and Caribbean Economic Association - LACEA, vol. 0(Fall 2008), pages 59-103. (Accessed 14 September 2025). https://ideas.repec.org/a/col/000425/008595.html

Petroleum Law (as amended). (1987). Official Gazette of the Islamic Republic of Iran [In Persian].

Pourali, A., Naghibi, S. A., Mohebi, M., & Arabiyan, A. (2024). Ownership of Oil and Gas Resources in Iran under Imami Jurisprudence. Journal of Law and Political Studies, 4(2), 288–300 [In Persian]. https://doi.org/10.48309/jlps.2024.2.9

Public Investment Fund (PIF). (2023). https://www.pif.gov.sa/en

Rodionov, V. (2023). The Norwegian Energy Transition’s Financial Issues in the Conditions of World Economy Globalization. SSRN: https://ssrn.com/abstract=4385253 or http://dx.doi.org/10.2139/ssrn.4385253 (Accessed 2S eptember 2025)

Qian, X., & Ghaziani, M. A. (2024). The Relationship between Transparency Obligations and Foreign Investment in Renewable Energies: Realising the Potential Role of IIAs. Energies 2024,17,11 2721. https://doi.org/10.3390/en17112721

Rastgoo Khiavi, P., Piri, M., Abdi, O. (2025). The Legal Nature of Joint Operating Agreements within the Framework of Iran Petroleum Contracts (IPC). Energy Law Studies, 10(1), 25–48 [In Persian]. https://doi.org/10.22059/JRELS.2025.365263.539

Rostami, V., & Binaei Bashi, M. (2026). Public Finance Law of Oil and Gas (2nd ed.). Tehran: Dadgostar Publications [In Persian].

Saaresto, T. M., & Vleugel, R. (2025). Energy transition strategy. Lund University Publications. 1-83. https://lup.lub.lu.se/student-papers/record/9202790/file/9202792.pdf (Accessed 2 October 2025)

Saberi, A., Nikkhah Nasab, M. (2023). Review of the Seventh Development Plan Bill (17): Energy Sector (Report No. 19069)”. Tehran: Islamic Consultative Assembly Research Center [In Persian].

Sadabadi, A. A., Shahi, N., & Borhani, F. (2025). Change management in Iran’s energy policies: analyzing the transition process from fossil fuels to renewable energies. Energy Conversion and Management: X Volume 28, October 2025, 101269 https://doi.org/10.1016/j.ecmx.2025.101269

Saudi Aramco. (2023). Annual report 2023. (Accessed 2 October 2025). https://www.aramco.com/-/media/publications/corporate-reports/annual-reports/saudi-aramco-ara-2023-english.pdf

Seventh Progress Plan Law of the Islamic Republic of Iran. (2024). Official Gazette of the Islamic Republic of Iran [In Persian].

Shargh Daily. (2025, November 11). “The Wrong Path of Oil” [In Persian].

Sheline, A., & Coates Ulrichsen, K. (2025). Saudi Arabia’s Vision 2030 and a Nation in Transition. Rice University’s Baker Institute for Public Policy. (Accessed 2 October 2025).

https://www.bakerinstitute.org/sites/default/files/2025-07/20250724-Sheline%20and%20Ulrichsen-Vision%202030-Research%20Paper_0.pdf

Shiravi Khouzani, A. (2024). Advanced Oil and Gas Law: Lecture Notes. Faculty of Law, Farabi College, University of Tehran [In Persian].

Shiravi Khouzani, A. (2021). Oil and Gas Law (5th ed.). Tehran: Mizan Legal Foundation [In Persian].

Smil, V. (2018). “Energy and Civilization: A History”. Paperback ISBN: 9780262536165 Pub date: November 13, 2018 Publisher: Cambridge, The MIT Press. pp.568.

Sovacool, B. K. (2016). How long will it take? Conceptualizing the temporal dynamics of energy transitions. Energy Research and Social Science, 13, 202–215. https://doi.org/10.1016/j.erss.2015.12.020

Stevens, P. (2016). International oil companies: The death of the old business model. Chatham House Report.

https://www.chathamhouse.org/sites/default/files/publications/research/2016-05-05-international-oil-companies-stevens.pdf (Accessed 22 September 2025).

Talus, K. (2023). Adapting international natural gas and LNG agreements in the light of the energy transition. Journal of World Energy Law and Business, 16(6), 492–505. https://doi.org/10.1093/jwelb/jwad023

Tehran Times, (2025). “Iran’s Oil Ministry moves to attract investment, ease upstream contracting”, June 11.

https://www.tehrantimes.com/news/514170/Oil-Ministry-moves-to-attract-investment-ease-upstream-contracting? (Accessed 22 September 2025).

Timmermann, C., & Noboa, E. (2022). Energy sovereignty: A values-based conceptual analysis. Science and Engineering Ethics, 70. (6), Article 66. https://link.springer.com/article/10.1007/s11948-022-00409-x

United Nations. (2015). Transforming our world: The 2030 Agenda for Sustainable Development. New York: United Nations.

file:///C:/Users/pc1/Downloads/A_70_L.1-EN.pdf (Accessed 20

September 2025).

United Nations Framework Convention on Climate Change (UNFCCC). (2015). The Paris Agreement. https://unfccc.int/process-and-meetings/the-paris-agreement/the-paris-agreement

Van de Graaf, T., & Sovacool, B. K. (2020). Global energy politics. First published by Polity Press. ISBN: 9781509530496

Van Groenendaal, W. J. H. & Mazraati, M. (2006). A critical review of Iran’s buyback contracts. Energy Policy, 34(18), 3709–3718. https://doi.org/10.1016/j.enpol.2005.08.011

Victor, D. G., Hults, D. R., & Thurber, M. C. (Eds.). (2012). Oil and Governance: State-owned Enterprises and the World Energy Supply. Cambridge University Press. https://www.cambridge.org/core/books/oil-and-governance.

Zhou, O., & Jaipuriyar, M. (2021). Sinopec aims Yuan 30 billion investment through 2025 to boost hydrogen strategy. S and P Global Commodity Insights.https://www.spglobal.com/commodity-insights/en/news-research/latest-news/energy-transition/083121-sinopec-aims-yuan-30-billion-investment-through-2025-to-boost-hydrogen-strategy? (Accessed 5 October 2025)