Global Policy Forum

Iraq Oil Technocrats: Time Not Suitable For Oil Law


By Hassan Hafidh

Dow Jones Newswires
February 17, 2007

Several former Iraqi oil officials and well-known technocrats told a seminar organized in Amman Saturday that the current situation in Iraq doesn't permit for enacting a hydrocarbon law that would allow foreign companies to start investing in the country's vast oil reserves. Tariq Shafiq, a former Iraqi oil official and one of three experts entrusted with drafting the controversial oil law, criticized an amended copy of the document, saying it has ceased to be a means of achieving unity of the Iraqi people. The seminar was chaired by two former heads of the State Oil Marketing Organization, or SOMO, Mohammed al-Jibouri and Dhiaa al-Bakkaa. Jibouri was also the trade minister under then-Prime Minister Ayad Alawi, who headed the first Iraqi cabinet after the U.S.-led invasion.

"There is no need for issuing such a law at this time because (international oil) companies can't start working in Iraq under such a bad security situation," said Qasim Taqi, a former Iraqi oil minister. "There is no need for this law under the current circumstances," Saddalla Al-Fat'hi, a former Iraqi oil official and currently a UAE-based oil expert, wrote to the one-day seminar organized in one of Amman's five-star hotels. "The draft law is very dangerous, (and) shouldn't be issued at this time," Faleh al-Khayat, a former Iraqi oil official said. "Why all this hurry in making this law?" Muhammad-Ali Zainy, an Iraqi oil expert and from the London-based Centre for Global Energy Studies asked in remarks he sent to the seminar attended by more than 30 ex-Iraqi oil officials and technocrats.

But a few of the participants held the view that the law should be enacted in order to pave the way for international oil companies to start investing in the dilapidated and war-hit Iraqi oil sector. "We need this law at the present time and we need international oil companies to come to Iraq in order to save the Iraqi oil industry from further deterioration," said Ahmed Basheer al-Na'eb, a former Iraqi oil ministry employee and former dean of the University of Technology in Baghdad. "It is about time Iraq had a petroleum law that sets out clear terms and conditions for good oil and gas industry exploitation plans, policy and execution," Shafiq said in his paper, which was presented to the seminar.

However, other experts argued that major oil companies weren't ready to risk the lives of their personnel and come to Iraq. "Is it because Iraq now is in peace and international oil companies are flocking in droves to Iraq to share in the development and production of Iraq's huge reserves?" asked Zainy. "Not at all," he answered. "Major oil companies won't sign contracts with Iraq to develop oil fields," one expert told the seminar. "Only small and unknown companies would risk signing contracts but these companies would fail to implement their contracts," he added.

Senior Iraqi officials are still wrangling over the draft law that would set out the legal framework for the Iraqi authorities to sign contracts with foreign companies to develop its vast oil reserves, the world largest after those of Saudi Arabia. They had called off a key seminar, planned for Feb. 10 in Baghdad, at which they were to announce the completion of the draft law. The state-run television station al-Iraqyia said late Friday night that the cabinet headed by Prime Minister Nouri al-Maliki discussed the draft law. It said the cabinet needs to hold further discussions before sending the document to the parliament for final approval.

Kurds Still Dispute Draft Oil Law

Shafiq, who took part in drafting the law, told the seminar that despite major amendments made to the first version of the draft law, which were mostly forced by the Kurdistan Regional Government, the Kurds still haven't approved the negotiated draft law. He said among the amended articles of the law, for example, was the one concerning the powers of a federal gas and oil council which was in the first version of the draft law had given authority to approve oil contracts. "Now that article was amended and the FGOC is given mild powers," he said. "The FGOC can review contracts," the latest version of the law stated. The law states the establishment of the FGOC as the highest oil authority in the country. It will be headed by the prime minister or his deputy and consist of the ministers of oil, planning and finance. There are also other articles which were amended in favor of the KRG, he added.

The other sticking point over a hydrocarbon law has always been the issue of how much control the regions should be given over resources in their areas. Shafiq criticized the amended draft law, saying it gives regions and governorates more authority to control Iraq's oil and gas resources than the central government in Baghdad. "The balance of power in the management of Iraq's oil and gas resources would have shifted alarmingly from the center to the regions," he told the seminar. Iraqi oil technocrats and officials worry that giving the KRG control over resources on their own territories could set a precedent, particularly in the oil-rich south, where most of the country's giant hydrocarbon structures lie. The draft law was also criticized by Malik Dohan al-Hassan, a former Iraqi justice minister in the cabinet of Alawi. "The law has been worded in a very indecent manner and that most of its articles are vague." The latest version of the law sets out a new model for production-sharing agreements, or PSAs, with Western companies. According to the new PSA model, companies cannot book crude oil reserves of any given oil field in their own market capitalizations, as it the case with ordinary PSAs.

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