Journal Of Researches Energy Law Studies

Journal Of Researches Energy Law Studies

. A Legal Analysis of the ‘Non-Transfer of Ownership’ Clause in Production Sharing Agreements (PSAs) for Joint Oil and Gas Fields: A Study of Clause (a), Article 44 of the Seventh Development Plan

Document Type : ISI

Authors
Abbas Kazemi Najafabadi 1
Iman Jahandari 2
1 Associate Professor, Department of Private Law, Faculty of Law and Political Science, Allameh Tabataba’i University, Tehran, Iran.
2 PhD Candidate in International Oil and Gas Contract Management, Allameh Tabataba’i University, Tehran, Iran.
10.22059/jrels.2026.407749.613
Abstract
Introduction
The development of joint oil and gas fields constitutes a strategic legal decision at the intersection of public law, petroleum contract law, and energy economics, requiring a balance between attracting investment/technology and safeguarding state sovereignty over natural resources.
Domestic literature evaluates Production Sharing Agreements (PSAs) through two primary lenses: legal and economic-technical. Legally, scholars advocate for their incremental implementation in smaller fields (Tabatabaei, 1392; Montazer & Ebrahimi, 1392), fiscal modeling based on pre-revolutionary contracts (Manzoor et al., 1394), and resolving statutory ambiguities regarding reserve ownership (Kahnehoushnezhad & Ebrahimi, 1395; Kazeminajafabadi, 1395). Studies also verify the PSA’s compatibility with Shi’a jurisprudence (nafye sabil) and public ownership, asserting its superiority over concessionary systems (Seyyed Morteza Hosseini et al., 1400; Bayati et al., 1399; Arian & Bahmaei, 1398). Economically, research confirms that PSAs offer greater fiscal flexibility and risk allocation than buybacks (Ghorbani-Pashakolaei et al., 1393; Taherifard & Salimifar, 1394; Aminzadeh & Aghababai-Dehkordi, 1393; Amani & Hamidzadeh, 1394; Tavakoli et al., 1395). While some identify the PSA as minimizing risk for the National Iranian Oil Company (Kavousi et al., 1397; Ayvazloo et al., 1397), others demonstrate the long-term operational and financial advantages of the Iran Petroleum Contract (IPC) framework, specifically in the Yadavaran field (Khorsandi et al., 1397; Shirijian & Taherifard, 1400; Emami-Meybodi et al., 1399; Aljomeh et al., 1400). This is supplemented by strategic insights from the Iraqi Kurdistan Region (Behnam & Zarei, 1402) and recent technical models for sustainable production (Shokri et al., 1396; Gholami et al., 1402; Khaksar Astaneh et al., 1402; Rajabi et al., 1403).
International comparative literature highlights the inefficiency of Iranian buybacks relative to PSAs (Ghandi & Lin, 2012; 2017; 2020), emphasizing the PSA’s capacity to attract foreign investment while preserving host-state sovereignty (Feng et al., 2014; Salih & Yamulki, 2020; Dirani & Ponomarenko, 2021). Modern global scholarship underscores the necessity of replacing stabilization clauses with flexible renegotiation mechanisms (Hassan, 2023; Ayo & Ojo, 2023), refining fiscal terms (Hai & Pingping, 2024), and addressing the IPC’s remaining competitive gap compared to international PSAs (Bahmaei & Afshar, 2025).
This study addresses a legal paradox introduced by Article 44(a) of the Seventh Development Plan Act, which authorizes PSAs “without transferring ownership” of reserves, despite production sharing being an inherent, defining element of the PSA mechanism. By conceptually separating ownership of in-situ reserves from title to the allocated share of produced hydrocarbons, this article delineates the scope of the legislative restriction. It evaluates whether the allocation of produced oil or gas violates the statutory prohibition or is legally reconcilable with it, establishing a compliant legal framework for drafting PSAs in Iran’s joint fields.

Method
This study is applied research and was conducted through a sequential exploratory mixed-methods design (Creswell & Plano Clark, 2018) in three phases. In the first phase (qualitative), semi-structured interviews with 14 prominent experts in oil law and energy economics were used to identify the main research problem: the conflict between the “no transfer of ownership” clause in Article 44(a) of the Seventh Development Plan Act and the inherent nature of Production Sharing Agreements (i.e., production sharing). In the second phase (quantitative), a Likert-scale questionnaire was designed and completed by 11 experts; the resulting data were analyzed in SPSS using descriptive statistics to statistically document the importance of, and consensus on, the identified challenge. In the third phase (legal analysis), an analytical-interpretive approach, together with a library-based review of domestic legislation and international contract models, was used to examine the legal dimensions of this conflict and develop a proposed solution.

Conclusions
The findings indicate that the phrase “without transfer of ownership” in Article 44(a) of the Seventh Development Plan Act does not, if interpreted precisely and systematically, create an absolute barrier to the conclusion of Production Sharing Agreements in joint fields. The apparent conflict arises because the contractor receives a share of production; however, legally, a distinction must be made between ownership of the field, reservoir, and hydrocarbons in situ and a contractual right to a segregated share of produced output.
Under Iranian law, oil and gas, as anfal and public wealth, are not transferable in terms of ownership of the field or reservoir; thus, the state and the National Iranian Oil Company cannot transfer sovereign rights or ownership of subsurface resources. However, this restriction does not, by itself, prohibit the transfer of a share of extracted production after separation, measurement, and delivery, unless expressly stated by law.
Accordingly, granting the investor a share of production, once contractual conditions are met and at a specified delivery point, does not amount to transferring ownership of the field or reservoir; rather, it constitutes performance of a contractual obligation regarding a product that has exited its in-situ natural state. The empirical findings also suggest that the issue is primarily an interpretive and legislative ambiguity rather than a structural obstacle.
Therefore, the proper legal characterization is conditional permissibility: a Production Sharing Agreement is compatible with the “no transfer of ownership” clause, provided that the contract expressly defines the continuing public ownership of the field and reservoir, the non-transfer of sovereign rights, the time at which the contractor’s entitlement arises, the point of product transfer, the method of calculating and delivering the share, and the consequences of non-performance.
Keywords
Upstream contracts
Seventh Development Plan
Production sharing
Jjoint field
Non-transfer of ownership
Subjects
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Journal Of Researches Energy Law Studies
Volume 11, Issue 2
February 2026
Pages 365-389