Iraq's Kurds object to oil law

Iraqi Oil Minister Hussain al-Shahristani pictured on 24 October 2006 (YOSHIKAZU TSUNO/AFP/Getty Images).

Iraq's Kurdistan Regional Government (KRG) will not sign up to details in the emerging oil law that would centralise control of most of the country's reserves, the region's top energy official said on Wednesday.

Disagreement could delay the country's parliament from passing the law, seen as key to attracting billions of dollars in foreign investment needed to overhaul the industry and boost oil output.

Annexes to the draft oil law that aim to wrest oilfields from regional governments and place them in the hands of a newly formed state-oil company are unconstitutional, Ashti Hawrami, minister of natural resources in the semi-autonomous region in northern Iraq told Reuters.

"The annexes as they are written now will not be accepted by the KRG," Hawrami said. "If I don't get the lion's share of fields [in the region] then it's a bad law. If the law dilutes regional control then it is unconstitutional."

"It is the dream of some in Iraq to go back to centrally controlling the oil as before and that will never happen."

The annexes to the law have yet to be debated, casting doubt on Iraqi Oil Minister Hussain al-Shahristani's assertion earlier in April that the law could be passed in two months.

"It is better to give it some time and get it right, rather than rush it and get stuck with it," Hawrami said.

Despite the differences, Hawrami said the KRG was committed to the law and wanted it to succeed, but in a form acceptable to all regions.

"I will fight to the last minute for it, because it is in our interest to make it work and the only way for Iraq to stay united."

He spoke to Reuters ahead of a meeting of around 60 Iraqi parliamentarians and oil experts in Dubai to discuss the law on Wednesday.

Iraq's cabinet approved the draft law in February, which is awaiting parliament's ratification. The draft did not formalise divisive issues such as how oil revenues would be shared and who would gain control of discovered but undeveloped oilfields - the federal or regional - governments. Those details were to be clarified in the annexes.

Shahristani said in January that the national oil company would be given control of the country's most prized oilfields, and fields on their periphery.

Hawrami said on Wednesday draft annexes would give the state oil company control of an unacceptably high 80% of Iraq's oil reserves. The country holds the world's third largest reserves.

Hawrami said an Iraq National Oil Company should maintain control of producing fields, but did not have the expertise or capital for discovered but undeveloped fields.

"Some of those fields were discovered 30 years ago," he said.

"If you haven't done anything with them in 30 years, what makes you think you can suddenly be well organised and do a good job?"

Hawrami said he favoured production sharing agreements with international oil companies to develop discovered fields.

There were also still disagreements about the mechanism for distributing oil revenue, Hawrami said.

The KRG wants a fund set up outside of Iraq to distribute the revenue, and does not want to rely on the central government for payment.

The central government has on several occasions delayed payment of the KRG's share of the federal budget, he said. It owes the KRG around $1 billion in late payments already this year, he added. The KRG does not want to see a similar situation develop with future oil revenue, he said.

The KRG is writing its own oil law in line with Iraq's constitution, he said.

The region intends to contract out all of the 38 oil and gas exploration blocks it has drawn up by the end of this year, he said. That forms part of the region's plan to boost oil exports to around a million barrels per day (bpd) as soon as possible.

So far, around 10 blocks have been contracted out to oil and gas firms under agreements already signed. Hawrami has previously said that existing agreements total around 200,000 bpd of future production and that the region aims to boost output by another 800,000 bpd in the next five years.

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