Following progress by Iraq’s parliament on the passage of key oil laws, a debate at the parliamentary committee stage of the legislative process has thrown the passage of one of the bills as drafted into doubt.
Iraq’s oil minister, Abdul-Kareem Luaibi, has criticised the provision of the new hydrocarbon law reinstating an Iraqi National Oil Company. According to Reuters reports, Luaibi told the Iraqi parliament’s oil and energy committee “I ask, ‘What would it add to Iraq’s oil sector?’ I say nothing.” Luaibi claims “our companies are doing the same job. No need for establishing this company.”
Thamir Ghadhban, the top energy adviser to Prime Minister Nuri al-Maliki, defended the bill and said reviving INOC was vital for the development of the energy sector, according to Reuters.
“The establishment of an independent National Oil Company is very essential to develop Iraq’s energy sector, with the oil ministry to … formulate oil policy,” Ghadhban said.
According to an article by Iraq Oil Report based on sight of a 2009 draft bill, the new Iraqi National Oil Company will be a cabinent level, vertically-integrated series of companies dealig with everything from exploration to refining. However, the exact nature and of the NOC will not be known until the committee stage is concluded.
The Iraqi cabinet approved a draft hydrocarbons law in 2009, where it has languished as sectarian differences and inefficiency have thwarted it’s progress through the legislative process.
Iraq had a national company until 1987, when Saddam Hussein absorbed the company into the government’s Oil Ministry. There followed years of neglect and abuse of the country’s oil infrastructure.
The creation of a new national oil company is a key part of Deputy Prime Minister for Energy Hussain al-Shahstriani’s ambitious plan to turn around its struggling oil sector to take advantage of its vast mineral wealth.
The bill creating the new national oil company is seperate from the general draft hydrocarbons bill, which seeks to largely de-politicise the hydrocarbons industry by placing startegic control of hydrocarbon reserves in the hands of a Federal Council for Oil & Gas.
The bill will also give IOCs a sound legal framework in which to operate in the country. Elements of the law are disputed by representatives from the semi-autonomous Kurdish region to the North, who also dispute the fairness of proposed revenue-sharing legislation. The Kurdish government has been signing 37 exploration and production agreements with IOCs, and the national government has signed 12. Both insist the others’ deals are illegitimate without mutual consent.
The new hydrocarbons law will regularise such contracts and put a new framework in place by which new contracts are authorised and negotiated.
In the meantime, the Iraqi parliament is seeking a ban on all new hydrocarbon contracts until the suite of bills have been passed into law, something al-Shastriani is keen to resist. Parliamentarians want a ban to be put into force as a means of incentivising the settling and passage of the draft bills.
Part of the problem with the Iraqi parliament is an intractable sectarian hostility between some MPs and the open corruption of others. Iraq Oil Report reports via Twitter that as Luaibi exited parliament yesterday, a Basra MP handed him an application for a family member to obtain approval for a new petrol station petrol station. Luaibi declined.
Adnana Janadi, chairman of the parliamentary committee on the new hydrocarbon framework law, wants to “end the vicious circle” of a lack of progress spurring new contracts the exact status of which is unclear and not scrutinised in a a way most would like.
The deals currently signed by both the Kurdish and national authorities would in theory raise Iraqi oil production to a world-beating 13.5 million barrels per day.
The ban is likely to be strongly opposed by the government, which is keen to finalise several deals including the Shell/Mitsubishi associated gas deal with would finally capture 700 million cubic feet per day of gas wastefully flared from the oil fields of Southern Iraq, equivalent to 10% of total UK energy demand. While gas is flared the Iraqi cabinet has been forced to go to Iran to meet energy demand.
