Iraq Oil Law (Still) Coming Soon

By Ben Lando, UPI. Posted September 4, 2007.

DUBAI, United Arab Emirates, Sept. 4 (UPI) --The question is simple on the third and final day of a major Iraqi energy conference where hundreds of hungry oil men and women broke bread with Iraq's industry chiefs, politicians and technocrats: When will Baghdad set the ground rules for the international oil community's long-awaited venture into the largest oil prize on Earth?

The answer, evenly nuanced, is clear: A version of the Iraq oil and natural gas law was agreed to by most of Iraq's political leadership last week, and when Parliament resumes this week it will, possibly, debate the law and, perhaps, maybe vote on it soon.

"They have a deal on the government level. Once it comes to the Parliament, it is the Parliament who has to have the say," Abdul-Hadi al-Hasani, deputy head of Parliament's Energy Committee, said on the sidelines of the summit, though he hasn't seen the latest version of the bill yet.

"This is really a discussion taking place between all expertise, members of Parliament, economists, government officials," he said, adding the balance between Iraqi and investor interests isn't a quick resolve. "I wish it could have been passed yesterday. We need it. But simply it has to take its own time to come through maturely."

The world's leading hydrocarbons firms attending the Iraq Oil, Gas, Petrochemical and Electricity Summit, organized by the London-based Iraq Development Program, held roundtables over the future of Iraq's oil while planning deals to venture into its sister sectors. Yet, from the minnows to the giants, service firms and equipment providers, they wait, with billions of dollars, for this law, which has numerous times before been just around the corner.

Theirs aren't the only eyes on Iraq's oil, the third-largest proven reserves in the world, made more tempting when one considers how much of the country is unexplored. What has been found, usually close to the surface and sweet, is pumped and refined cheaper than anywhere else, except for the cost of producing amid war.

Iraq's political parties have no easy task, however, thus the delay to decide how large a role the federal government will have in deciding the country's oil strategy and, pushed by the powerful oil unions, the extent private and foreign hands will be allowed a grab.

President Bush arrived in Iraq Monday, just days before Parliament and the U.S. Congress return from recess, and with the upcoming war evaluation from top U.S. military and embassy officials looming.

Bush met with Prime Minister Nouri al-Maliki, vice presidents Adel Abdul Mehdi and Tareq al-Hashemi, President Jalal Talabani, Deputy Prime Minister Barham Saleh, and Massoud Barzani, president of the Kurdistan Regional Government, two Shiite Arabs, one Sunni Arab and three Kurds. Last week the Iraqis (minus Saleh) agreed on previously disputed points, including the oil law.

"This has principally been agreed to and now it's in the Parliament so there's going to be debate," said Ali al-Dabbagh, the government's spokesman. "It's just a matter of time."

"We can't say when it will be in," he said, "but as soon as it is started debated it is a sign that finally it will be approved. The government is asking the Parliament to put it in a priority in order to make the hydrocarbons industry to be activated."

Iraq is steadily producing 2 million barrels per day, sending more than three-quarters to the international market. Last year it earned more than $31 billion, fulfilling more than 93 percent of the federal budget. That's an income stream Iraq is keen not only on keeping going, but increasing.

Iraq's 115 billion barrels of proven reserves could sustain a higher production output. The goal is 6.5 million bpd by 2015, according to a presentation at the summit by Thamir Ghadhban, Maliki's top energy adviser and a former oil minister. The plan is to make use of Iraq's natural gas reserves as well, two-thirds of which is wasted, increasing production by 347 percent over eight years.

But Iraq needs to spend $56 billion on its oil sector and $11 billion on electricity through 2011 to meet its plans, said Kamal Field al-Basri, senior economic adviser to Maliki and executive director of the Iraq Institute for Economic Reform. (Electricity Minister Karim Waheed Hasan put the figure at $25 billion through 2016.)

"We can satisfy about 42 percent of that need internally, but the rest we need from the international side" through grants, loans and the international private sector, Basri said. "The oil law is coming through. There's difficulties, but it will come as any other law would, with some difficulties. It will come."

Officially drafted more than a year ago by three respected Iraqi oil technocrats, one being Ghadhban, the draft hydrocarbons law has been through the democratic process and back, and altered so much the two other authors no longer back it. An agreement was said to be imminent just before last New Year. A deal was reached in late February but fell through. Subsequent deadlines in May and July were missed.

"I have a feeling for September they're going to be busy with the other issues," said former Oil Minister Ibrahim Bahrul-Uloom, referring to other benchmarks. "I expect it will be a good debate in the Parliament next month or the month after."

Officials United Press International spoke to said if it wasn't the first item on Parliament's agenda, it could be high up there. Ramadan begins next week, but that's not expected to stop debate.

"After the deep discussion among the Council of Ministers and among the political leaders … they agreed they would pass this," said Sami al-Askari, a member of Parliament and a top adviser to Maliki. Parliament, he said, is a "reflection" of the membership in the council and those at last week's meeting.

"We all follow the leaders," he said. "This is a formality, to discuss it" in Parliament, where a few minor things will be changed but the law will be passed after a "few weeks talking about it."

The Kurds, who now control a small fraction of the reserves in Iraq's relatively peaceful, prosperous and semi-autonomous north, are adamant the central government isn't the sole power, fearing a strong arm from Baghdad similar to Saddam Hussein's. They want regions (the KRG is the only one, so far) and governorates to have a significant role in contracting; limits on the fields the federal government, via the reconstituted Iraq National Oil Co., has proprietary access to; and a move from the decades of oil nationalism to the free market.

The Sunnis, controlling land with nearly no proven reserves, fear a weak central government will leave them fighting for revenue scraps. Many were oppressed by Saddam despite sharing religion and ethnicity, and they now hold a minority status in government. They largely oppose key tenets of the law the KRG backs, and vice versa.

Shiites, the majority of Iraqis, live atop more than 80 percent of Iraq's oil reserves, including the oil capital of Basra, from where nearly all of Iraq's exports are sent. This sets a tempting offer to form a region like the Kurds did, though internal Shiite politics debate how many provinces should form the region; ardent Shiite nationalists want Iraq unified, a position backed by the federal government.

Piecing together an oil law various sides agree with doesn't end there. A large contingent in Parliament refuses to take up the oil law alone. They want it coupled with related measures regulating INOC, restructuring the Ministry of Oil and settling the issue of redistributing revenues, a law that in reality would actually satisfy Bush and Congress' oil benchmark.

Robert Fryklund, vice president of industry relations for energy consultant firm IHS, told UPI last week Parliament must both reconvene and then approve the oil law, "and then anything that's being worked on from the preliminary standpoint would be able to move forward."

The Parliament, however, could barely reach quorum before the August recess, and is fractured by political party and other factional fighting. And Maliki's political coalition is weak and smaller than earlier this year.

"I don't think anything is going to happen until that gets sorted out," Fryklund said, "anybody signing anything, I doubt. Other than in Kurdistan Iraq."

The KRG has signed its own oil deals, approved a regional oil law and is unlikely to wait too long for federal action before signing more.

Many oil officials refused to talk on the record about Iraqi prospects, but all admitted that getting a law in place, and possibly an improvement in security, is all they are waiting for.

"Iraq is the only country in the world with great reserves, it's not developed," said Orhan Duran, general manager of Genel Enerji, the Turkish company that joined with Canada's Addax Petroleum to sign a production-sharing agreement with the KRG in May 200, and is now preparing a $1 billion development plan for their find. "On the other side, the quality of oil is very good. Plus a lot of exploration potential still is not touched."

The oil law is needed, he said, "just to have a better picture."

See more stories tagged with: iraq, oil, oil law

Liked this story? Get top stories in your inbox each week from AlterNet! Sign up now »