KRG demands

The KRG press release accompanying the new english translation says: "The KRG has also voluntarily agreed that existing KRG petroleum contracts, which are explicitly validated by the Iraq Constitution, may also be reviewed by a panel of independent advisors." It continues: "The 15 February draft has not yet been introduced to the Iraq Council of Representatives (the Parliament), pending the completion of related matters. The Oil and Energy Committee will next prepare the four critical Annexes referred to in the draft Oil and Gas Law, which allocate the management of particular petroleum fields and exploration areas in Iraq to the KRG, the Iraq National Oil Company, and the Iraq Ministry of Oil. The Committee also needs to agree model petroleum contracts and guidelines for contractual terms, without which no investment in Iraq can begin. The Kurdistan Regional Government has agreed with the Federal Government that it will support the draft Federal Oil and Gas Law provided that the Annexes and other documents are concluded to the KRG's satisfaction, and if it is accompanied by an agreed Revenue Sharing Law for submission as a package to the Council of Representatives. " Minister Hawrami adds: “We must make sure that the Federal Government, like Kurdistan, is doing all it can to attract new investment to Iraq. It is vital that the Federal Government adopt the same market-friendly approach that the KRG has been using in its contracts.”

Iraqi Cabinet resolution on Oil Law

The resolution of the Iraqi Cabinet assumes the Oil Law will pass rapidly through the Parliament and be harmonised with existing Iraqi laws and implemented by 31 May.

Council of Ministers, Oil and Energy Committee, Feb 26th, 2007 11:00 AM
The Iraqi government [the council of ministers] submits this law, regulating oil operations, to the Council of Representatives... the following arrangements shall be adopted to finalize the regulating of oil and gas operations in Iraq:

1- This oil and gas law and its four appendices shall be submitted to the Council of Representatives, after agreeing on the types of model contracts and on the general terms and conditions, together with the Financial Revenues Management Law. All parties shall finalize this task before March 15th 2007.

2- Finalizing the laws of the Iraqi National Oil Company [INOC] and the Ministry of Oil in accordance to this laws articles and regulations. In addition, the Oil and Gas law in Kurdistan region must be in harmony with the articles and regulations of the federal oil and gas law, ad in accordance to the constitution.

3- All oil operations and exploration and production rights' granting shall be put on hold for areas included in article 140 that might have administrative changes for its boarders, except the oil operations related to the INOC that may continue its work in the fields discovered and already developed in accordance to the constitution.

4- All parties must abstain from signing new contracts agreements related to exploration and production activates in Iraq until this law is fully enacted.

5- The Federal Government, in coordination with the regions governments, shall finalize the requirements needed to implement this law and activate the entities mentioned in the law in a time period not exceeding the end of May 2007. In case this deadline was not met, the Iraqi Prime Minister shall meet with the president of Kurdistan Region to implement the law within one month and reach a solution based on one of the following options:
a. In case article 5 was not finalized by the deadline of May 31st 2007, the two parties shall have the right to sign Exploration and Production Contracts in accordance to the constitution, this law, and the general principles of contracts' models (the first option).
b. Extend the time period mention above.

Oil Law approved by Cabinet

The Iraqi Cabinet today approved the draft oil law. The AP reports that "the Parliament will take up the measure when it reconvenes early next month after a recess. With all major parties endorsing the bill, approval is likely — although some politicians predicted a vigorous debate on some of the details." It continues: "Many Iraqis fear the measure will effectively hand the country's major natural resources over to foreign oil companies. Supporters maintain that oil giants have the billions of dollars needed to upgrade the country's decrepit wells, pipelines and port. Under the oil legislation, regional administrations will be empowered to negotiate contracts with international oil companies. The contracts will be reviewed by a central government committee in Baghdad headed by the prime minister... According to Iraqis familiar with the deliberations, the draft law would offer international oil companies several methods to invest, including production-sharing agreements. Those would give U.S. and other international companies a substantial share of the oil revenues to recover their initial investments and then allow them big tax breaks."

Pepe Escobar, Asia Time's leading journalists, provides a damning critique of the draft law which he says is a result of "SCIRI delivering Iraq's Holy Grail to Bush/Cheney and Big Oil - in exchange for not being chased out of power by the Pentagon." He points out that outside of Iraq: "Nobody wants colonial-style PSAs forced down their throat anymore. According to the International Energy Agency, PSAs apply to only 12% of global oil reserves, in cases where costs are very high and nobody knows what will be found (certainly not the Iraqi case). No big Middle Eastern oil producer works with PSAs. Russia and Venezuela are renegotiating all of them."

KRG statement on draft Oil Law

The Kurdistan Regional Government's Minister for Natural Resources, Dr Ashti Hawrami, gives his perspective on the latest draft of the oil law, approved by Barzani and Malaki on saturday.

Draft Oil Law leaked

A draft of the Oil Law, dated 15th January (so not the most recent draft) has been obtained and published online by al-Ghad (who have also written a commentary in Arabic). It is currently only available in Arabic (pdf), although an English translation is underway. Hands Off Iraqi Oil has not yet been able to confirm whether the document is an accurate draft, and calls for the Iraqi government to publish an official draft and provide sufficient time for public consultation before introducing the law to parliament.

Oil meeting cancelled

A key meeting today on the oil law at the Rasheed Hotel in Baghdad, involving all of the ministers working on this issue has been canceled.

Kurds resume negotiations

A Kurdish delegation led by KRG Natural Resources Minister Ashti Haurami is currently on a visit to Baghdad to resume negotiations with the federal government on working out a final draft for the oil draft law, KRG spokesman Khaled Saleh said. There is still disagremeent over who would have final say over contracts and the exact percentage of and mechanism for oil revenue disbursement. Officials of the Iraq Oil Ministry had earlier said the deal had been reached, a claim KRG Prime Minister Nigervan Barazani immediately denied.

Ministry spokesman expects ratification within a month

Oil Ministry spokesman Assem Jihad told the AP: "We hope the ratification of this law will be achieved no more than one month from now... The law allows for concessions to global oil companies as a way to achieve the highest benefit for Iraqis, taking into consideration fair competition between these companies regardless of their nationalities. This law stresses that all oil revenues will go to a central fund and then will be distributed to all Iraqis in all regions and provinces according their populations." He also said the law provided for all oil contracts signed by former leader Saddam Hussein's regime or by the regional government of Kurdistan to be reviewed and amended if needed. "This law sets the ground rules and draws oil policies for a balanced development in all Iraqi areas." A federal council for oil and gas will be formed to study plans to develop oil infrastructure and review the contracts. This council will be headed by the prime minister, Nouri al-Mailiki, with representatives from oil, financial and planning ministries along with the central bank of Iraq.

Oil law draft completed

Iraq leaders agree draft oil law (Reuters) Wed 17 Jan 2007 12:24:06 GMT, by Mariam Karouny (extracts)

Iraq's Oil Committee has agreed a final draft of an Oil Law that sets rules for sharing revenues and boosting output and aims to bring in billions of dollars of foreign investment, an Oil Ministry spokesman said on Wednesday. The draft, drawn up senior national and regional leaders, calls for a federal committee headed by the prime minister to oversee all future contracts. It will have the power to review existing deals signed under Saddam Hussein or by the Kurdish regional government, spokesman Asim Jihad said.

The negotiating team, headed by Deputy Prime Minister Barham Salih, had finalised the draft late on Tuesday, Jihad said, and the bill would go to the full cabinet next week for approval. After that it will go to parliament. Officials hope that the broad base of the negotiating team means it will pass easily. The final draft was in line with earlier versions described last month after a previous round of talks. A national oil company would be set up to develop production and exports and the law is intended to ensure balanced development of the oil industry across Iraq's regions, Jihad said. It establishes a mechanism for centralising oil revenues and distributing them to the various regions.

PSA language removed from oil law draft

Hassan Hafidh of Dow Jones reports that: An amended copy of a draft Iraq hydrocarbon law sets out a new model for production-sharing agreements, or PSAs, with Western companies, a senior Iraqi oil official said Tuesday. The amended copy of the controversial law dated Dec. 15, seen by Dow Jones Newswires, doesn't refer directly to PSAs, as the first draft did a few months ago. "We have changed the text of the law from PSA to development and production contract in order to avoid (media) fuss," said the senior official, who is close to the committee entrusted with drafting the law. The new draft law recommends the Iraqi government sign "development and production contracts," or DPCs, along with service or risk production contracts with foreign companies to upgrade the country's war-ravaged oil industry. The 38-page document states: "A model contract could be based on service contract, development and production contract or risk contract." An older copy of the draft from August stated: "A model contract could be based on service contract, buyback or PSA."... The Independent reported this month that Iraq's massive oil reserves may be thrown open for large-scale exploitation. Western oil companies "could end up grabbing up to 75% of the beleaguered nation's oil profits under an oil law," the paper reported. The Iraqi oil official rejected The Independent's report, saying it is baseless. "The law states that the government should make the utmost returns from our oil and gas resources and that Iraq owns all its (oil and gas) resources," he said. Negotiations with Western companies could start immediately after parliament approves the draft law, which could be in "the first quarter of this year," the official said.

The official said the draft law doesn't spell out what kind of PSAs Iraq would sign with Western oil companies, but officials have agreed that the Iraqi government should have its own model of PSA. The new model is based on both PSAs and buyback contracts, he said. The official said the new Iraqi PSA model, or DPC, would state the following terms:

• Companies cannot book crude oil reserves of any given oil field in their own market capitalizations, as is the case with ordinary PSAs.
• Iraq will pay the costs of the contract in cash, rather than paying back the money through produced crude oil or products, he said.
• All equipment brought by the company to carry out the contract is the property of Iraq. The company, however, has the right to use this equipment to carry out work in Iraq.
• Any extension of the contract beyond the original timeframe should be approved by the Iraqi cabinet.
• Profit received by the company is to be agreed on by both sides, for example, one dollar on each barrel produced for a certain period of time, the official said.

The official said the Iraqi government wants to sign DPCs to develop undiscovered oil fields, rather than to discovered oil fields. The new draft law also recommends signing service and risk production contracts. A risk production contract allows a company to explore and develop a particular location, but doesn't give it the right to claim back expenses from the Iraqi government if it doesn't find oil. The draft law recommends setting up model, or prototype, contracts after the approval of the law. It also recommends the establishment of an Iraqi National Oil Company, and a Federal Oil and Gas Council. The latter would approve oil contracts and set the country's petroleum policies, and would include ministers of oil, finance, and planning, plus the governor of the Iraqi Central Bank and a representative from each region or province.