Local Iraqi Officials Outraged Over Baghdad Auctioning Off Their Natural Gas Fields

The Iraqi Oil Ministry's auction of three natural gas fields last week has been angrily opposed by all the provinces in which they are located, with provincial officials threatening legal action against Baghdad and warning that they will refuse to cooperate with the developers.

Bids were granted to companies from Turkey, Kuwait, Kazakhstan and South Korea to develop gas fields holding about 10% of the country's reserves. The fields in Anbar, Diyala and Basra are primarily being developed for domestic consumption to improve Iraq's feeble power supply, Oil Ministry officials said.

Provincial council members maintain the Oil Ministry overstepped its bounds -- and may have violated the constitution -- by holding the auction without consulting local officials. The provinces say they want more control over their natural resources and assurances that the developments will benefit their economies.

The dispute reflects ongoing tensions between local authorities and Baghdad over management of the country's vast natural resources. The proposed hydrocarbons law, drafted in 2007, regulates the management and contracting of natural resources between local and federal authorities -- though it has been stalled for years. Parliament was expected to debate the legislation after the March elections, but this has been held up by the bitter political disputes that have left the country without a functioning government.

Iraq has the fourth-largest proven oil reserves in the world and is believed to have the 10-largest gas reserves. Most of the country's natural resources are undeveloped.

In western Anbar province, the council is threatening to sue the Oil Ministry for not consulting local authorities on the auction bid. It says it will not assist the foreign firms that won the right to develop Akkas, a large gas reserve near the Syrian border.

While no laws exist to regulate Iraq's natural resources, local officials point to Article 109 of the constitution that mandates that the federal government should manage oil and gas "with the producing governorates and regional governments".

"The council will not provide any kind of cooperation or support or facilities to those companies that won the bid," Jasim al-Halbusi, the head of the provincial council, told the Institute for War and Peace Reporting (IWPR).

Asked if there could be attacks on the foreign companies developing the field, Halbusi responded, "The central government will bear the responsibility for ignoring the decision of Anbar's local government and the demands of Anbar's people.

"Signing the contract regarding Akkas gas field without listening to our decision [to refuse the deal] will stoke problems between the local and federal governments."

Once the center of the Sunni insurgency, Anbar is now largely controlled by local tribes who defected from groups such as al-Qaeda. Security has improved there since 2007 but remains a major concern, particularly for foreigners.

Oil Minister Hussein al-Shahristani called on local authorities to cooperate with the firms that won the gas field auction, warning that "the government will be very strong and severely punish everyone who hinders development of these contracts".

Anbar's provincial council announced its opposition to the auction days before bidding opened in Baghdad. The conflict between Anbar and central government began earlier this year when the Oil Ministry turned down a proposal by local officials to have a consortium of Turkish and German companies develop Akkas, Mezher Hasan al-Mullah, head of Anbar council's investment committee, said. The council threatened to reject the Oil Ministry's proposals after their own was turned down, Mullah said.