28 June 2007
Iraq’s draft petroleum law is still awaiting the go-ahead from Kurdish officials following changes to the text introduced by the state Shura Council, a panel of judges tasked with reviewing the legal language of the draft, a senior Iraqi government official said Wednesday.
“We have sent the draft to the Kurdistan Regional Government (KRG) and we are waiting for their comments on the changes in the language introduced by the Shura Council and which also affects some of the agreements reached on the draft,” Thamir Ghadban, energy adviser to the Iraqi prime minister said at an industry conference in Istanbul.
Ghadban, who is a member of the ministerial energy committee and one of the main authors of the draft petroleum law, said it might take several weeks and up to two months before final agreement is reached on the text and it’s ready to be sent to parliament for approval.
The Iraqi cabinet approved the draft law in mid-February following months of protracted negotiations between representatives of the federal government and the KRG. However, the Kurds later protested that annexes published with the law which set three lists of oil fields to be developed by the national oil company or foreign investors, were not part of the agreement. They said the annexes gave too much power to the Iraq National Oil Co. (INOC), to be established later by law, leaving most of the reserves and developed or partly developed fields under its control.
According to some proposals debated within the federal government, agreement on the annexes would be postponed until after parliament’s approval of the petroleum law. If agreed, that compromise would delay the debate on the issue but does not solve it.
“It might be better to leave it to the federal Oil and Gas Council [to be established once the law is approved by parliament] to decide on the annexes in order to expedite the process,” Ghadban said.
The petroleum law is one of four bills that form a package deal agreed between Iraq’s political parties, that also includes some constitutional amendments of articles dealing with the oil and gas sector.
The financial resources law that sets the rules for the sharing of oil revenues between the federal government and the regions and governorates was agreed last week and is awaiting submission to parliament.
A third bill, known as the ministry of oil law, which defines the role and tasks of the federal oil ministry and its relationship with INOC and the regions has also been agreed by the ministerial energy committee and has been sent to the Shura Council for legal approval. Once the council approves the draft, it will be submitted to the cabinet for endorsement, Ghadban said.
The energy committee is currently finalizing a draft law on the establishment of INOC. The committee has also agreed approximately 50 proposed changes to the articles of the constitution which are awaiting approval by the different political parties ahead of their submission to parliament.
International oil companies have been waiting for the various oil-related bills that will create the legal framework for the badly needed investments in Iraq’s oil and gas fields to be approved and open the doors to their entry into Iraq. However, the debate in parliament is expected to be lengthy. Furthermore, analysts say the process to create a federal oil and gas council along sectarian lines, as stipulated in the law, will also be long and controversial.
Once set up, the council will be tasked with formulating oil policy including on foreign investments by international oil companies, defining guidelines for contracts to be awarded as well as criteria for qualifying foreign companies to be awarded contracts. It will also have the powers to approve contracts signed with international oil companies.
To avoid situations like that experienced by neighboring Kuwait resulting from the politicization of the foreign investment issue, and which could delay the approval of international contracts by several years, signed contracts will not be submitted to the Iraqi parliament for approval.
Although the draft petroleum law does not state production sharing agreements among the types of contracts to be awarded by Iraq, the issue is still the subject of intense debate inside and outside Iraq. It is expected to be settled by the federal Oil and Gas Council.
By Ruba Husari, Istanbul
(Published in International Oil Daily June 28, 2007)