The year 2011 might turn out to be the year of Iraq’s hydrocarbon law, as this much awaited legislation could finally find its way to parliament, after the new council of ministers signs off on it. This doesn’t mean that the new law will cruise through without controversy. If anything, the discussions at the CWC Iraq Petroleum conference in London last week revealed the two sides are still at odds over the articles of the draft law even though there is general agreement that the legislation should be approved.
According to Ashti Hawrami, the KRG’s minister of natural resources, the hydrocarbon law should be approved and “there is no room for objections in parliament”. The political parties who struck a deal last month to form the new government have already backed the Kurdish demand that the draft laws being held under the previous government get legislated within one year of the formation of Nouri al-Maliki’s second cabinet. “Both the hydrocarbon law and the revenue sharing law are an integral part of the agreed power sharing deal,” Hawrami said.
Thamir al-Ghadhban, the head of the advisory commission at the prime minister’s office, a body of technocrats whose job is to vet laws, propose policies and give an expert opinion on matters referred to it, begged to disagree. “The new cabinet has to have its say before the drafts are sent to parliament,” he argued. Furthermore, the two laws are part of a four-laws package that also includes a legislation on the recreation of the Iraq National Oil Co (INOC) and another on reforming the oil ministry to turn it into a policy and regulatory body once INOC takes over the operational and oversight responsibilities over the oil and gas fields.
It is only normal that a new cabinet which has new representatives from new parties holds a discussion over the draft hydrocarbon law. It’s even more so for parliament to do so, as a body elected by the people to legislate in the name of the people, or else it would be seen as rubber-stamping what the political leaders agree behind closed doors. Furthermore, despite the agreement in principle that the laws should be legislated within one year of the new cabinet taking oath, the parties seem to have different versions of the drafts in mind.
The draft revenue sharing law risks being the most controversial due to new modifications introduced by the KRG, which are certain to draw fire from more than one camp. The modifications aim at using that law to resolve the issue of payments to oil companies who signed contracts with the Kurdish region by suggesting companies get paid for their operational costs and their share of profit, according to their production sharing contracts, from Iraq’s gross income before any deductions are made and before the net revenue is disbursed according to the federal budget.
That’s where Mr Ghadhban, a co-author of many of these laws, drew the line and where others in the federal government would certainly follow. Deducting oil development costs from the revenue first would treat those payments to companies working in the Kurdish region as sovereign expenditures, he argued. Similar payments to companies who signed service contracts with the oil ministry in Baghdad are budgeted for in the federal budget and are not treated as sovereign costs.