Iraq’s New Minister Courts Oil Firms, Faces Big Challenges

24 May 2006

Iraq’s new Oil Minister Hussein al-Shahristani sought to send a positive message to international oil companies eyeing Iraq as he took over at the ministry Tuesday.

“There is need to pass an oil and gas law to guarantee the right conditions for international companies to help develop the Iraqi oil sector,” al-Shahristani told reporters in Baghdad, after the handover from former acting minister Hashem al-Hashemi.

The 64-year-old nuclear scientist, who served as deputy speaker in the previous National Assembly, admitted that Iraq needs billions of dollars in foreign investments which it could not provide on its own.

“We will start contacts with the largest oil companies in the world who want to come in and work in Iraq and bring their technology and capital and sign, with our conditions, contracts to realize greater benefits for the Iraq people,” the minister was quoted as saying by wire reports.

“Our resources cannot be developed through local efforts alone because we have neither the means nor the expertise — there have been a lot of developments in oil technology over the past two decades,” he added.

However, al-Shahristani seemed well aware of other priorities for the sector, including the need to tackle widespread corruption. “One of our first priorities is to fight corruption and oil smuggling, and I think that financial corruption is more dangerous than acts of sabotage against oil installations,” he said.

Al-Shahristani faces a long list of tasks, including dealing with fuel shortages for transportation and power generation. He has promised to solve the refined product shortages “within a short period of two to three months.”

Iraqi sources in Baghdad said corruption among senior officials in the oil and other ministries will be difficult to eradicate, as smuggling has become a profitable business for many, sheltered by the security forces that are supposed to be protecting oil infrastructure, including refineries and storage facilities.

Al-Shahristani must also deal with political appointees in government and power centers in the north and south, which present a major challenge for Baghdad as it prepares to introduce federalism in line with the constitution.
Iraqi sources told International Oil Daily Tuesday that al-Shahristani has been consulting with industry veterans in the past few days on the challenges facing his ministry. Changes in major posts, including at marketing arm Somo, are expected soon.

Oil ministry sources say political appointees — mainly installed by the religious Al-Fadhila party, which was in charge of the ministry and its affiliates over the past year — will not go without a fuss. Al-Fadhila also controls the southern oil province around Basrah, where its supporters have in the past brought oil operations to a halt to protest Baghdad’s decisions. The south is responsible for most of Iraq’s 2 million b/d of output and all of its exports.

Al-Shahristani said Tuesday that “any oil production, exports or exploration should be handled by the Ministry of Oil.” A number of oil exploration contracts have been signed in recent years by the Kurdistan Regional Government in northern Iraq with international oil companies, including Norway’s DNO and a partnership of Turkey’s Genel Energi with Swiss Addax.

By Ruba Husari, Dubai

(Published in International Oil Daily May 24, 2006)

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