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Iraq leaders still wrangling over oil law

11/22/2006   Reuters
Baghdad - Senior Iraqi officials will resume negotiations to try to resolve a dispute over a bill intended to encourage foreign investment in the oil and gas industry, the government's economy chief said.

Control of the world's third largest oil reserves divides Iraq's three main communities, the Arab Sunni and Shi'ite Muslims and ethnic Kurds. Most of the oil lies in the mainly Shi'ite south and close to Kurdistan in the north.

The issue of who has the power to sign contracts -- the provinces or the national government -- is critical because a major regional say will devolve more power over resources to Iraq's majority Shi'ites and the Kurds than the national government.

Minority Sunni Arabs, the dominant group under Saddam Hussein, fear regional devolution will leave them with nothing.

'The Oil Committee is going to resume its meetings on Thursday to discuss the Oil Law,' Deputy Prime Minister Barham Salih said.

'Signing contracts remains a matter of dispute,' he added.

Salih, a Kurd, said earlier this month the legislation should be enacted by the end of the year.

He chairs a government committee on oil and energy policy, composed of key ministers, which had struggled to overcome deep differences on the components of a new law to replace provisions dating from the rule of Saddam Hussein.

Oil Minister Hussain Al Shahristani has said his office must have ultimate control over Iraq's oil reserves and has criticised deals already signed with Norwegian and Turkish firms by the autonomous Kurdish regional government in Arbil.

Kurdish Prime Minister Nechirvan Barzani has hit back, defending his constitutional rights in the sector. Some of Shahristani's fellow Shi'ites also oppose his desire to centralise control and would like to see more power for regions.

Ashti Hawramani, the Kurdistan region's natural resources minister, said: 'I'm optimistic about reaching an understanding between the two sides ... This understanding will be on the basis of the permanent Iraqi constitution.'

Years of UN sanctions, mismanagement under Saddam and now daily violence since the March 2003 US-led invasion have severely degraded Iraq's oil sector and it now needs billions of dollars of capital investment.

Sabotage attacks have made Iraq's northern export pipeline unusable for most of the time since the invasion so Baghdad relies mostly on its main southern Basra oil terminal for exports.

Oil ministry spokesman Asim Jihad said exports now stand at 1.7 million barrels per day (bpd). Salih said this month Iraq aims to double exports by 2010 and raise output to 6 million bpd from 2.3 million bpd.

Major oil companies are waiting for the oil investment law to set out the regulatory backdrop before they commit, but analysts say, even then, violence and insecurity are likely to delay investment, perhaps for years to come.

Jihad said formation of an oil company for the southern province of Maysan, which includes oil fields around Amara, has already been approved by the cabinet, and the provinces of Wasit and Kirkuk would also get their own companies, though they would be 'fully supervised by the oil ministry'.

Shahristani told state television Iraqiya this week that any province that produced at least 100,000 to 150,000 bpd would be able to have its own oil company.

Another Iraqi official said the new petroleum law would call for re-establishing the Iraq National Oil Company (INOC) as a holding company with affiliates that could be defined geographically, technically or along both lines. Their role would be to operate the oilfields.

Jihad said Iraq planned to open the bidding for contracts to build three major oil refineries at the beginning of next year.

He said the refineries in question were Al Nahrain, near the southern city of Kerbala, with a capacity of 140,000 bpd, Nassiriya in the south with a capacity of 300,000 bpd and Goya in the northern province of Sulaimaniya with a capacity of 70,000 bpd.
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