Renewed interest in Iran’s energy sector could be on the horizon as the country’s oil export levels rise and work continues toward improving fiscal terms to lure oil and gas investors.

The turnaround comes after sanctions were eased earlier this year with the possibility of further relief. Iran has some of the world’s largest proven oil and gas reserves, but oil production has nose-dived in recent years following U.S.- and EU-imposed sanctions that restricted the oil imports in response to Iran’s illicit nuclear activities.

The International Energy Agency recently reported that Iran’s crude shipments in February reached their highest—1.65 MMbbl/d—since June 2012, according to a Bloomberg report. The amount exceeded the average 1 MMbbl/d limit agreed to as part of the interim nuclear deal that made way for the eased sanctions.

Iran had an estimated 154 Bbbl of proven oil reserves in 2013, according to the U.S. Energy Information Administration (EIA). However, production has fallen due to the sanctions, which were imposed in late 2011 and mid 2012. Total production dropped from 4.2 MMbbl/d in 2011 to about 3.5 MMbbl/d of total liquids—including about 3 MMb/d of crude oil—in 2012.

Coordinated by the EU, talks on the nuclear deal continue between the U.S., the U.K., Germany, France, Russia, China and Iran. A final deadline is set for sometime in July. But even if the sanctions are lifted, Iran will still need to reverse production declines by seeking new technologies and attracting foreign investment, according to an analyst with GlobalData, a research and consulting firm.

Recent revamps to the country’s petroleum contracts could be just what the country needs to stimulate investment.

“Based on recent reports, this new model will offer a share of output based on oil prices and associated risk, instead of cash repayment,” Will Scargill, GlobalData's upstream fiscal analyst, said in a prepared statement. “While Iran would retain ownership of reserves, this should allow companies to book production entitlement as reserves in financial reports. This would be similar to the production-sharing agreements (PSAs) offered in several countries in the region.”

Although the oil and gas industry is still awaiting details of the contract, expected later this year, “if the structure is similar to that of a conventional PSA, it’s likely that the contractor’s production share would vary according to profitability through an R-factor mechanism,” Scargill continued. “This model would not cap the rate of return as the buyback contract did, making it more attractive to investors.”

Another key feature of the contract is its link between the contractor’s share of output and oil prices, according to Scargill. “If the mechanism linking payment to prices adjusts the resultant production allocations in exact proportion to the prevailing price, the new model would in many ways be similar to service contracts, which pay cash fees. The payment value would not vary according to price, therefore providing a more stable contract for investors as no upside or downside price risk would be involved.”

But the efforts, which in the past also have included offering blocks for exploration and development, might not be fruitful if sanctions still exist.

“Virtually all western companies have halted their activities in Iran, although there are a number of Chinese and Russian companies that are still participating,” the EIA said. “The sanctions and lack of international involvement have particularly affected the upstream projects negatively, as the lack of expertise, technology and investment has resulted in delays and, in some cases, cancellations of projects. Nonetheless, development of a few projects continues, albeit at a slower pace than planned.”

One of the largest upstream projects is China National Petroleum Corp.’s (CNPC) Azadegan developments, which the EIA reported has proven reserves of 26 Bbbl. The project is being developed in two parts: North Azadegan (CNPC) and South Azadegan (National Iranian Oil Co.). Plans are for first phase to be completed by 2016 and Phase II by 2020.

GlobalData pointed out that the revised terms already have attracted interest from several international oil companies, including BP, Eni, Total, Gazprom, CNPC and Petronas.

News of a release of seismic data this week also could spark more interest.

Global Geo Services (GGS) has released the Persian Carpet 2000 multiclient 2-D seismic survey, which spans 106,000 km (65,865 miles) covering the Iranian part of the Persian Gulf and Oman Sea.

“Numerous undrilled structures and stratigraphic prospects already have been found from preliminary interpretation of the PC-2000 seismic data,” the company said in a news release. “With renewed interest from international oil companies for this database, GGS plans to reprocess the 106,000 km (65,865 miles) of MC2D data.”

GGS CEO Bjorn Ursin-Holm said, “Preliminary interpretation of the data shows geological risks will be minimal, reserves are huge and there is significant potential for the international community.”

Contact the author, Velda Addison, at vaddison@hartenergy.com.