NIOC Transaction Regulations

These days, it is frequently stated in many circles that the main reason for delays in upstream oil industry projects lies in the cumbersome regulations and bylaws governing tender procedures, the Iranian Government Electronic Procurement System (SETAD Iran), and the like—and that if the Oil Company were to revert to its own transaction regulations, everything would improve accordingly.

In this note, we seek to examine when and where the Transaction Regulations of the National Iranian Oil Company (NIOC) were born, and to argue that today, the tip of the spear regarding the non-utilization of NIOC’s transaction regulations is in fact directed at NIOC itself.

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⭕️ Year 1961 (1339):
At the end of the Transaction Regulations of the National Iranian Oil Company, it is stated that they were approved by the Supreme Petroleum Council in Khordad 1339 (June 1961) and that they repealed the regulations preceding them. Therefore, regulations also existed prior to 1339.
The latest amendment to these regulations dates back to 2001 (1380).

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⭕️ Year 1970 (1349):
Nevertheless, under Note 1 of Article 73 of the General Accounting Law of 1349 (1970), the National Iranian Oil Company was exempted from the Government Transaction Regulations that were introduced and approved pursuant to that law in 1349. The law provides as follows:

> “State-owned companies are required to draft their own transaction regulations based on the criteria set forth in Articles 68, 69, 70, and 71 and, in accordance with their legal statutes, submit them for approval by the competent authorities within one year.
Note 1 – … the National Iranian Oil Company and … shall be subject to the provisions of this Article.”

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⭕️ Year 1987 (1366):
In 1366 (1987), the new General Accounting Law stipulated that until new transaction regulations are approved, the previous government transaction regulations (related to the year 1349) shall remain valid. This situation has remained unchanged to date.
Thus, concurrently with the government transaction regulations, the National Iranian Oil Company had its own transaction regulations.

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⭕️ Year 2004 (1383):
In the Law on the Holding of Tenders, approved by the Islamic Consultative Assembly in 1383 (2004), Article 1 provides:

(a) This law is enacted for the purpose of determining the methods and stages of holding tenders and applies only to transactions conducted in compliance with this law.
(b) The three branches of the Islamic Republic of Iran, including ministries, organizations, and … as well as agencies and units whose inclusion under the law requires express mention, whether they have their own special laws or are subject to general laws and regulations—such as the National Iranian Oil Company, the National Iranian Gas Company, the National Petrochemical Company, … and their subsidiaries—are required to observe the provisions of this law in holding tenders.

In other words, the Law on the Holding of Tenders implicitly repealed certain parts of the Transaction Regulations of the National Iranian Oil Company, because Article 30 of the Tenders Law states that from the date of approval of this law, all laws and regulations contrary thereto applicable to the entities covered by this law shall be repealed.

This law is specific to tenders and is not extendable to auctions. Therefore, due to its later enactment, and solely with respect to tenders, the Tenders Law takes precedence over the General Accounting Law in cases of conflict.

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⭕️ Year 2012 (1391):
The return of the Transaction Regulations under the Law on the Duties and Authorities of the Ministry of Oil

Article 11 provides:

> The assignment and execution of projects related to the exploration, development, production, repair, and maintenance of joint oil and gas fields, upon approval of the Minister of Oil and solely in compliance with the Transaction Regulations of the National Iranian Oil Company, are exempt from the Law on the Holding of Tenders.
Note 1 – In implementation of this Article, determining the minimum share of the value of work allocated to the Iranian party, subject to Article (3) of the Law on Maximum Utilization of the Country’s Technical, Engineering, Production, Industrial, and Executive Capacity in Project Implementation and the Facilitation of Service Exports, approved in 1996 (1375), shall be the responsibility of the Minister of Oil.

As previously stated, at present, these regulations are applicable and may be relied upon in transactions related to joint fields. In addition, provisions relating to the assignment of sales agency, sales transactions, transfer of properties and real estate, issues related to buy-back contracts, and any matters that were not repealed by the enactment of the Law on the Holding of Tenders remain valid.

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⭕️ Year 2016 (1395):
In the new Articles of Association of the National Iranian Oil Company, approved in 1395 (2016), Article 33 sets forth the duties and authorities of the Board of Directors, including:

12 – Preparing and drafting the company’s financial and transaction regulations and amending them within the framework of the Law on the Duties and Authorities of the Ministry of Oil and the Law on the Holding of Tenders, including its subsequent amendments and addenda, for submission to the General Assembly.

On the other hand, under Article 10 concerning the powers of the General Assembly, it is stated:

7 – Approval of the company’s financial and transaction regulations and any amendments thereto, within the framework of the Law on the Duties and Authorities of the Ministry of Oil and the Law on the Holding of Tenders approved on 23/01/1383 (2004), and its subsequent amendments and addenda, upon proposal by the Board of Directors.

Therefore, responsibility now lies with the National Iranian Oil Company.