The presentation shares my perspectives on how the re-emergence of Iran has come about, where we are today, the energy opportunities that are likely to be on offer and under what terms, principal issues and challenges an investor is likely to face, and the likely impact this may have on the capital and energy markets.

1. April 2016
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The Re-emergence of Iran
DR NOEL FABRI
Principal & Managing Director
N C F E N E R G Y
Transactions & Advisory Services
12 April 2016

2. The Re-emergence of Iran
AGENDA
• How this has come about – historical context
• Where we are today
• Opportunities (in the Energy Sector)
• Forms of Cooperation & Investment Terms
• Issues & Challenges
• Impact on the Capital & the Energy Markets
• Conclusions
The Re-emergence of Iran
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3. Historical Context
History of Iran & rest of the world in 4 distinct periods
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Prior to
2006:
Failed
Expectations
• Multiple incidents relating to Iran’s adherence to Non-
Proliferation of Nuclear Weapons Treaty (NPT)
• Referral to UNSC – First Res in 2006 demanding Iran stop
uranium enrichment & processing
• Restricted business -
under Buy-back
Contract (BBC) for
upstream oil & gas
2006-2013:
Mutual
escalation
• 7 year race during which Iran built more centrifuges as the
rest of the world slapped more sanctions
• Little or no business
– even under
improved BBC terms
2013-2015:
Negotiations
• Saw a halt to Iran’s nuclear program
• Joint Comprehensive Plan of Action (JCPOA) between Iran
& P5+1 - 14 July ’15; endorsed by UNSC on 20 July ‘15
• No business
2016:
New
Expectations
• JCPOA ratified by all parties; in force – Jan 2016
• Limited no of centrifuges/reduced stockpiles in
Iran’s nuclear program
• Sanctions lifted
• Parties abide by terms
• Open for business -
under Iran
Petroleum Contract
(IPC) for upstream
oil & gas
The Re-emergence of Iran

4. Today and beyond
Joint Comprehensive Plan of Action – 4 major milestones
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Milestone 1:
Adoption Day:
October 2015
• Iran notifies IAEA it will apply the Additional Protocol to NPT (enhances
inspection regime) provisionally – and fulfills JCPOA commitments
• EU/other countries take measures to terminate sanctions; US to issue sanction
waivers (on banking, energy and oil trading, gas and petrochemicals investments)
Milestone 2:
Implementation
Day – Jan 2016
• IAEA issues report verifying that Iran has implemented nuclear-related measures
• UN terminates sanctions; EU (+ other States) suspend/terminate sanctions; US
‘ceases’ application of nuclear related sanctions for non-US persons; may allow
new licenses to be issued to non-US persons owned or controlled by US persons
Milestone 3:
Transition Day
– mid Oct 2023
• IAEA verification continues for ~ 8 years and if IAEA confirms that all nuclear
material in Iran is for peaceful activities, then
• Iran ratifies Additional Protocol to NPT
• EU terminates and US modifies/terminates any remaining sanctions
• If Iran violates JCPOA, old UN, EU and US sanctions could snap back
Milestone 4:
Termination
Day – Oct 2025
• Provided no UN sanctions are re-instated, UNSC passes resolution approving
termination of JCPOA and that it “would no longer be seized of the Iran nuclear
issue”
The Re-emergence of Iran

5. Today and beyond
Australian Companies and Individuals
• Australia lifted/suspended all UN and certain autonomous sanctions following
Implementation Day – see DFAT:http://dfat.gov.au/international-relations/security/sanctions/sanctions-regimes/iran/Pages/iran.aspx
• Certain restrictions remain in force in relation to arms, certain metals, software and
designated persons and entities. A sanctions permit can be obtained from Minister of
Foreign Affairs to engage in dealings that would otherwise be subject to remaining
Australian sanctions
• In addition, authorization from DFAT is required for transactions to or from Iran worth
$20,000 or more under anti-money laundering laws; and certain restrictions may apply
under general export and import regimes
• Other foreign regimes, like US and EU, have maintained certain sanctions in place
(mainly relating to human rights violation, support of terrorism and ballistic
missile program) and these have broad extraterritorial reach and may still apply to
activities undertaken by Australian companies and individuals involving Iran
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6. Today and beyond
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6The Re-emergence of Iran
Iran Government
Overview
• Led by moderate conservatives/pragmatists,
including President Hassan Rouhani
• Key Ministers served under previous
(reformist) Presidents
• Ministry of Petroleum has exclusive authority
to control/manage petroleum industry
• Led by x-Petroleum Minister, Bijan Zanganeh
• Managed by experienced, well educated and
capable technocrats who occupy key positions
(replacing Islamic Revolutionary Guard Corps
personnel)
• New Budget & 2016-21 5-yr Development
Plan waiting Parliamentary approval
Iran Government
Agenda
• Restore relations with West/rest of the world
• Restructure institutional decision making
• Implement reforms to transform the economy
through:
• sustainable development of the petroleum (and
other) sectors, including diversification away
from high oil dependence
• removal of sanctions, and
• foreign investment (target $50b/y to achieve 8%
annual growth)
• Tighter fiscal policy and gradual removal of
energy subsidies (to lower inflation, stabilize
the Rial and reduce unemployment > 10%)

7. Opportunities – Energy Sector
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• Iran is one of the richest oil and gas plays*
• 158 B bbls oil (10% of global oil – world’s 4th largest)
• 1200 Tcf gas (18% of global gas – world’s 2nd largest)
• High exploration potential: very limited exploration activity
since late 1970s - USGS estimates 67 B barrels of oil/
liquids yet to be discovered (70% success rate)
• A large portfolio of energy projects/infrastructure
• Aging fields are increasingly mature, with an average annual
decline rate of 7% – EOR programs through gas injection
not implemented in required speed or scale
• Several giant part or undeveloped onshore/offshore fields –
due to financial limitations and lack of technical know-how
• Numerous small to medium sized proven undeveloped
onshore and offshore fields
• Extensive oil/gas pipeline network and export facilities
• A reasonably developed petrochemical/refining industries
The Re-emergence of Iran
*Sources: Newsbase, MEES, BP Statistical Review of World Energy 2015,
World Fact Book, Wood Mackenzie, NIOC
Courtesy of NewsBase

8. Opportunities – Energy Sector
Iran offers a vast and largely untapped energy
opportunity slate largely on ‘ground floor’ terms:
• Immediate: IOR/EOR (gas injection)/re-development of giant
mature fields to maintain/increase production; oil developments of
giant (Azadegan, Yadavaran, South Pars oil layer) and small/
medium sized oilfields, with priority given to shared (with Iraq,
Saudi Arabia, UAE and Oman) or ‘socially inclusive’ fields; gas
field developments (N Pars, Kish, Lavan, Farzad B, Golshan etc.);
oil, condensate/NGL purchases
• Medium/long-term: gas export projects, by pipeline or FLNG/
LNG (to Asia, Gulf States, Europe); exploration in Gulf/Caspian
Sea; petrochemicals, refining, mining, infrastructure as well as
power generation
• US$150-550bn: required to 2025 (16-63bn/y of which 12-32 bn/y
are for energy FDI). 29 upstream oil projects (19 of which are
greenfield) and 20 gas projects (19 of which are greenfield) are
being offered, holding ~ 216 b bbls of STOIIP and 229 tsf of GIIP,
with 28 b boe of oil and gas recoverable
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Opportunities
Types:
The Re-emergence of Iran
Source:
Manaar Energy Group

9. Forms of Cooperation &
Investment Terms - Upstream
Iran Petroleum Contract (IPC): labeled as something in between a risk
service contract (RSC) and a production sharing contract (PSC), akin but
offering better terms than the 2008 Iraqi Technical Services Contract model
• Projects will be competitively tendered or negotiated individually, from a slate of
pre-approved Project Lists (involving a mix of both oil and gas, and both
greenfield and brownfield (re-) developments of existing fields and exploration)
• IPC format was approved by the Iran’s Council of Ministers in Sept 2015, and
unveiled at the RIPI Conference in Tehran on 28-29 Nov 2015 but full details
and final terms are yet to be announced
• IPC will provide for longer-term involvement of IOCs; full cost recovery and
adjusted returns commensurate with project risks and project performance; as
well as better financial transparency and competitiveness
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10. Forms of Cooperation &
Investment Terms - Upstream
IPC is reported to provide for improved terms:
• Longer contract term (20-25 years) allows for better transitions between
the exploration/appraisal, development and production phases, with the
possibility to extend into IOR/EOR phases
• A continuous project revenue installment schedule once production
starts for: cost recovery (from up to 50% of production); and
remuneration in the form of a per-barrel/boe “fee”
• Reduced risks through elimination of pre-set CAPEX ceiling for cost
recovery, allowing for upward variance in costs if required
• A floating remuneration that is both variable (to reflect field technical
complexity and incentivize exploration) and adjustable (to incentivize
cost savings, schedule milestones and higher production over a longer
period) and allows for upside (exposing investors to upside oil price risk,
if oil price benchmarks rise substantially)
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11. Forms of Cooperation &
Investment Terms - Upstream
IPC is also reported to provide for some tough requirements:
• Establishment of JVs with pre-qualified local Iranian companies and/or
National Iranian Oil Company (NIOC) subsidiary to manage project
operations and the appointment of IOCs as ‘Operating Manager’
• Local companies linked to clerics/Islamic Revolutionary Guard Corps have
extensive business interests and are likely to present lengthy and troublesome
due diligence processes that may create friction (not least due to the continued
and fresh application of secondary sanctions by the West) and may present
challenges in dealing with potential corrupt practices
• Iran’s local content is set at a minimum of 51% of the value of the
contract (to facilitate knowledge and technology transfers)
• Onerous and may create substantial risks to project implementation from both
a cost, schedule and quality perspective
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12. Forms of Cooperation &
Investment Terms -Downstream
• NIOC, the National Iranian Gas Company (NIGC), the National
Iranian Gas Export Company (NIGEC) and the National
Petrochemical Co. (NPC) are likely to (re-)design the contracts for
foreign participation in Iran’s downstream sector and be in a format
prevalent in the region, including joint venture, build-operate-transfer
and pure lump sum or cost plus service arrangements
• It is reported that NPC has submitted a revised model of cooperation
for the petrochemicals sector, which is now lodged with the Petroleum
Ministry and related bodies for final approval
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13. Issues and Challenges
• TECHNICAL - Key Reservoir &
Geological Challenges
• Generally simple anticline structures
with shallow reservoirs
• Fractured carbonates & gas/oil
gravity drainage (esp. for heavy oil/
sour gas)
• Deeper, lower-permeability
carbonate reservoirs
• 3D seismic imaging of fold/thrust
traps
• Subtle structures and depth
conversion
• Mixed carbonate/clastics systems
(offshore/Iraqi border)
• Management of IOR/EOR
processes (mainly gas injection) in
mature fields
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Kuh-e Kaki
f
ocarbon API Oil water
contact
SW
%
H2S
%
Hydrocarbons
(in place)
Reserves
(recoverable)*
Oil 34 -775m 39 1 .1 30MMbbl 3MMbbl
(10%)
Busghan
lated based on natural flow. That will be improved by artificial lifting and/or gas
Injection.

14. Issues & Challenges
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ìTHE POSITIVES THE NEGATIVESî
SANCTIONS
Sanctions snap-back does not apply
retroactively to contracts signed
JCPOA violation during the Transition
Period leads to sanctions snap back
INTERNATIONAL RELATIONS
Improving relations depend on attitudes
of next US President & Iran’s Supreme
Leader/conservative factions
Turbulent history with the West, as
evidenced from US/Iran relations
(see chart below)
The Re-emergence of Iran
Post-sanctions
Iran:
confrontation,
containment,
compromise or
cooperation?

15. Issues & Challenges
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ìTHE POSITIVES THE NEGATIVESî
COUNTRY RISK: isolation vs. interaction
Relatively stable politically; moderate
conservatives dominate government (most
reformists were banned) and have recently
won seats in the Majlis (parliament) and
the Assembly of Experts (chooses future
Supreme Leader)
Hardline conservatives exercise effective
power through: the office of the Supreme
Leader (can veto Laws); the Guardian
Council (can veto candidates); Judges;
Clerics; and Islamic Revolutionary Guard
Corps (control of big business)
FINANCE, BANKING & INSURANCE
Short term, there will be some appetite for
equity (large IOCs) and venture capital
(small qualified companies)
ECA financing/ Political Risk & Other
Insurances – not yet available and will
likely be restricted to certain sectors;
banking slowly resuming in non-US
currencies
The Re-emergence of Iran
The Economist: “In reality hardline and softer clerics intermarry, shift positions, and hedge their bets to keep power”

16. Issues & Challenges
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ìTHE POSITIVES THE NEGATIVESî
LEGAL RISKS
Iran Law: well established civil legal system;
principle of freedom of contract and
adherence to contract terms followed
Dispute resolution: ICC/UNCITRAL
accepted; party to 1958 NY Convention
..No modern legal concepts (JV, agency
etc.); mandatory rules at times not clear;
local contract models preferred making
negotiations long and difficult
..but not a party to ICSID Convention
FOREIGN INVESTMENT PROTECTION
Domestic Laws: Iran 2002 Foreign
Investment Promotion & Protection Act
Treaties: party to Bilateral ITs with 66
countries and Multilateral ITs with:
– Islamic States (OIC Investment Treaty)
– The ’tan States & Turkey (ECO-APPI Treaty)
..limited protection (domestic courts)
..but not with e.g. Australia, Netherlands,
Luxembourg, Singapore, UAE, UK, US
..untested, Islamic States only
..not yet in force
The Re-emergence of Iran

17. Issues & Challenges
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ìTHE POSITIVES THE NEGATIVESî
IMPLEMENTATION - COMMERCIALITY
Issues that may affect FID/production:
- Development/Production costs are
relatively low (70% of fields are onshore,
many with reservoirs at shallow depths)
- Well educated workforce, with some
local service contractors developing well
suited indigenous
technology/capabilities c
- Improved terms
and returns
..local JV partner, possible carry
..JMC-NIOC approvals for forward plans/
type of costs that are recoverable
..80% of workers have to be local (no
exposure to modern technology,
management skills)
..51% local content
..Unitization
..OPEC ceiling
..OIL PRICE
..IPC Terms untested
The Re-emergence of Iran

18. Issues & Challenges
• In the short term, taken together, the Negatives (political, country,
finance, legal and local partner/local content issues) present a major
counterweight to the Positives (sanctions lifting, opportunity slate and
new and improved petroleum contract terms), which in a less risky
political context with such low production costs and large reserves
would be considered as very attractive
• In the long term, the outlook trajectory appears positive as available
opportunities will be hard to ignore, investment framework progresses,
legal and political uncertainties unravel, and remaining risks/hurdles
are managed through the contract negotiation and JV project and
procurement implementation processes
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19. Impact of Iran’s Re-entry:
Capital
The landscape for scarce hydrocarbon sector
investment funds for Iran is very competitive:
• ~ US$100-300bn in new capital is required to
bring Iran’s oil and gas sector up to standard
international development levels and achieve
production targets, with the amount varying
according to timeframes for completing key
projects
• For IOCs, 2016 is shaping up to be a year of
cutting CAPEX, streamlining operations,
restructuring and focusing on geographies
where break-even points are low enough to
sustain profitability
• Long term, Iran’s impact on scarce investment
funds capture will depend on type of projects
offered, how attractive terms of investment
are, oil price and political risk perceptions
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20. Impact of Iran’s Re-entry:
Energy Markets
• Potential for new Iranian production for oil, gas and
petrochemicals is significant
• Home to the 4th largest crude oil reserves in the world
(or 13% of OPEC’s total) and to the 2nd largest gas
reserves (or 33% of OPEC’s total). Potential to compete
with the likes of US, Saudi Arabia, Russia and Iraq
• Production under sanctions
• For crude oil, averaged 2.88 Mbbl/day (down from 3.7
Mbbl/day in 2011), exports about 1.15Mbbl/day (down
from 2.6 Mbbl/d in 2011). In addition, Iran produces
about 0.7 Mbbl/day of condensate and NGLs
• For natural gas, averaged 22 Bcf/day (8.1 Tcf/y), most
of it is marketed domestically (5.7 out of 6.5 Tcf/y),
and the remainder re-injected into oil wells to enhance
recovery of oil (1.0 Tcf)/y or vented/flared (0.6 Tcf/y)
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21. Impact of Iran’s Re-entry:
Energy Markets
• Iran’s plans, post sanctions, are ambitious:
• Increase crude oil production to at least 4
mbpd in 2016, and then to 5.7 mbpd by
2018; condensate from 550 to 850 kbpd
• Increase natural gas production from 22 to
35.3 bcfd by 2018
• Increase annual petrochemical production
from 47 to 180 mt by the end of 2022.
• These plans face significant issues:
• how quickly can Iran bring new oil and gas
and petrochemicals to the market?
• how quickly can Iran market the new oil and
gas and petrochemicals given the current
competitive landscape for market grab and
price wars?
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Source: Wood Mackenzie & Manaar Energy Group
Iran: oil and NGL production by field
Major new/re- developments required to
arrest decline/increase production
Iran: natural gas production by field
Major new production from remaining
undeveloped phases of South Pars, onshore
Khuzestan (associated gas) and other large
offshore non-associated gas fields (North
Pars, Kish, Farzad, Lavan, Golshan etc.)

22. Impact of Iran’s Re-entry:
Energy Markets
Hossein Kazempour Ardebili (Iran OPEC governor) shed some light on these questions:
“Iran can almost immediately ramp up
production by 400-600,000 b/d from fields
where the flow of oil has been slowed
because of lack of buyers (during 2016).”
î - Only 300,000 b/d have been put into the
market by end Feb (or 3.3 MM b/d) – no
or modest impact on oil price
“Following that, a further 500,000 b/d can
be achieved by re-starting wells that were
shut down (earliest 2017).”
çè - By 2017, world markets should absorb + 1
MM b/d due to projected decline in non-
OPEC supplies (N America, Russia etc.) /
demand growth from emerging economies
“Further increases (beyond 2017) will
depend on whether and when foreign capital
and technology will flow in. This will not
only depend on the continued successful
implementation of the JCPOA but on oil
price and the terms that are offered”
î - 5.7 MM b/d by 2018 is ambitious – low
CAPEX/OPEX per barrel but tough price
environment +competitive supplier market
- Higher gas production possible but export
success subject to financing, pricing/
contract and geopolitical issues being
resolved
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23. Impact of Iran’s Re-entry:
Energy Markets
• Now that Iran is allowed to sell its oil
more freely (major buyers include China,
India, Japan, South Korea, Taiwan and
Turkey), export volumes will substantially
increase*
• Iran is reported to be willing to enter into
output freeze but only after it reaches 4 M
b/d (Iran is not taking part in this month’s
OPEC talks in Doha to agree a process for
freezing output at Jan 2016 levels)
* Iran’s index value is highest in the PRIX INDEX Analytical Note Q1 2016
(>85%), a political risk forecast for global oil exports. This implies that PRX
country analysts are confident of a substantial rise in exports by end Q1 2016
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24. CONCLUSIONS
• Post lifting of sanctions and long term, Iran is likely to re-emerge as one of the top
nascent global hydrocarbons superpowers
• For this to happen, IOC technology and billions of dollars in investment are needed
to arrest the decline in production from Iran's aging oil fields and modernize
refinery/petrochemical industries, and ultimately increase capacity; and for new gas
field developments to be brought online
• Much will depend on (i) no sanctions snap back; (ii) type of projects on offer; (iii)
acceptable terms; (iv) local operating hurdles removed; and (v) Iran’s ability to gain
market share
• Many big opportunities, interwoven geo-politics and economics, operating
challenges…
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25. CONTACT DETAILS
DR NOEL FABRI
Principal and Managing Director
N C F E N E R G Y P T Y LT D
Transactions & Advisor y Ser vices
noel.fabri@ncfenergy.com
+61 488 400 425
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