For more than 35 years Iran has utilised the service contract and Buy-Back in its dealings with international oil companies to develop its upstream oil and gas industry.  This form of contract has been used mainly because certain restrictions that regulate the manner of dealing between the Government and the companies are set down in the Oil Acts.  In this thesis, deterministic and stochastic models, including Monte Carlo simulation, are applied to the Buy-Back contract.  The results derived from data from Iranian oil fields highlight serious shortcomings of the Buy-Back contract.  They show that there is an extremely small upside potential for international oil companies and a failure to achieve maximum economic recovery for the Government over the life of the oil fields that have been exploited.  The results of our deterministic and stochastic PSC model show that PSC has flexible structure when key variables change; the government share of economic rent and the government and contractor upside potential are quite high, while at the same time the contractor and government downside risk is reasonable.  Under such conditions there is a greater incentive for contractor to maximum production from each field because this in turn increases his share of the profit. There are significant formal differences between the Buy-Back contract and the Production Sharing contract. However, the thesis shows that the Expediency council has been prepared to import flexibility into the operation of legal principles if certain important social goals can thereby be better achieved.  This thesis suggests that such flexibility is required in the approach of the Iranian legal system.