Home » Headlines, Politics
Oil troubles won’t last forever
Submitted by Ben Lando on Wednesday, 21 October 2009No Comment
ShareThis

By BEN LANDO
Iraq Oil Report

ISTANBUL – Disputes over how to manage Iraq’s oil sector, and who gets to call the shots, have plateaued at a tense level for the past three years, but the top oil adviser to Iraq’s prime minister is optimistic agreements will be made after January’s national elections.

“The objection has become much, much, much less,” Thamir Ghadhban said at a press conference following meetings between the ministry and companies looking to bid in an upcoming oil deal auction.

A major issue is opposition to Oil Minister Hussain al-Shahristani’s oil deals. He’s gotten government approval for the BP/Chinese National Petroleum Corp. contract for the Rumaila field and is nearing deals for two others with the world’s largest oil companies. They were offered in a June 30 auction.

Ghadhban, who served as oil minister twice since 2003, and ministry officials say Iraq hasn’t eased terms on oil deals already offered. Despite initial hesitation, companies are signing.
Thamir Ghadhban with a Senator Barack Obama during a July 2008 visit to Baghdad.

Thamir Ghadhban with a Senator Barack Obama during a July 2008 visit to Baghdad.

“The government and ministry stuck to their offer and the companies … came down to a fee that looked very low,” he said.

On Dec. 11 and 12 the ministry will conduct an auction for 10 oil projects.

“We will expect a smooth transfer, a smooth transition and an enduring commitment of the future government of whatever commitments this government is taking regarding awarding contracts in the first and second round,” Ghadhban said.

Shahristani will have to face Parliament questioning Oct. 27. Members of Parliament, led by the Kurdistan Alliance block and the Basra-based Fadhila Party, have gone as far as call for his resignation. This is unlikely, as is any vote of no confidence in the session.

Iraq’s Kurds are at loggerheads with Shahristani over the minister’s opposition to the two dozen oil deals signed between the Kurdistan Regional Government (KRG) and foreign oil companies. Fadhila and other nationalist parties are wary of Shahristani bringing in foreign oil firms without including local governments in the decision making.

Without a new oil law – in draft form since 2006, a victim of the Iraqi political disputes – there is a discrepancy of interpretations of the 2005 Constitution and the Saddam Hussein-era oil regulations which remain on the books.

One sticking point is whether the contracts the ministry is signing are large and generous enough to foreign firms to require Parliament’s approval. Some members have called them illegal for this reason, though so far none have been challenged for having only cabinet approval.

“There is no other need. We are not going to send it to the council of representatives,” Ghadhban said. “It is the power or authority of the council of ministers.”

The argument over the KRG’s oil deals has little chance of being resolved soon, especially since Shahristani and KRG Minister of Natural Resources Ashti Hawrami literally do not talk.

This is but one of many disagreements between Iraq’s Kurdish and Arab political leaderships. Another is the responsibility to govern land referred to as “disputed territories,” a strip outside the KRG’s official territory. It witnessed Saddam Hussein at his worst, forcibly removing residents and replacing them with allied Sunni Arabs, killing thousands in the process.

The city of Kirkuk is in the “disputed territories.” So is the Kirkuk oil field, which flows into the official KRG territory. There have been development plans for the Khormala Dome, the section in the KRG land, and even equipment purchased and placed on site.

But multiple times work was prevented by Kurdish security forces. Now, in either an agreement not made public or a successful show of force, the KRG has started production from the field and is sending it to a new refinery near the KRG capital, Erbil.

Khormala Dome, however, is included in the contracting terms offered in the June tender for the Kirkuk field. Shell is heading a consortium now negotiating the field.

With Baghdad contracting an oil field that is being partially developed by the KRG – the rest being operated by the Iraqi state North Oil Company – without an agreement as to each party’s rights, this could add another front for political fighting.

Ghadhban, however, calls it a “special situation” that pales in comparison to fights over the oil law, elections and broader disputed territories.

“I am confident that these and the Khormala case will be solved in the coming months, hopefully immediately after the new government,” he said.