The draft Iraqi oil and gas law...the “big knot” has not yet been resolved

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[size=52]The draft Iraqi oil and gas law...the “big knot” has not yet been resolved[/size]

[size=45]Since the first session of the Iraqi Council of Representatives, in 2005, the draft oil and gas law has been locked away, as disagreements prevent its approval in its final form.[/size]
[size=45]After 18 years, he announced, in late last August, the formation of a committee to develop “a draft of the oil and gas law and present it to the government and the House of Representatives,” according to what MP Firas Al-Muslimawy revealed to the Iraqi News Agency “INA.”[/size]
[size=45]The representative confirmed that “there is a real will in the House of Representatives to legislate the law,” noting that “Iraq’s oil is one and indivisible, and there is a movement towards achieving justice in the distribution of wealth to the people, whether in the Kurdistan region, the center, or the south.”[/size]
[size=45]Iraq exports an average of 3.3 million barrels of crude oil per day, and black gold constitutes more than 90 percent of the Iraqi treasury’s resources.[/size]
[size=45]The draft Iraqi oil and gas law
regulates this vital sector for Iraq and the management of the country’s oil fields through one national company, with imports being deposited in one account.[/size]
[size=45]The financial advisor to the Iraqi Prime Minister, Mazhar Muhammad Salih, confirmed in statements to the “Al-Hurra” website that “accelerating the approval of the federal oil and gas project law in the House of Representatives as quickly as possible will establish a stable national road map for investment and production of the country’s primary sovereign resource, which is oil and gas.”[/size]
[size=45]He explained that “this natural resource contributes directly to Iraq’s gross domestic product at a direct rate of approximately 50 percent, and leaves an indirect impact on the total economic activity of our country at a rate of no less than 85 percent.”[/size]
[size=45]Saleh said, “Adopting a unified national oil policy, and achieving optimal investment and production in Iraq’s oil area, starting from the southern fields up to the northern and regional fields, is an important and strategic matter in the matter of taking advantage of opportunity costs in the optimal and harmonious operation of the Iraqi oil policy currently.”[/size]
[size=45]Not to mention “achieving the best financial returns for the country that we all aspire to to finance building the Iraqi economy and the basics of sustainable development,” according to Counselor Saleh.[/size]
[size=45]The draft oil and gas law in Iraq available to Parliament stipulates that responsibility for managing the country's oil fields must be entrusted to a national oil company, and supervised by a federal council specialized in this subject.[/size]
[size=45]For its part, the Kurdistan Oil Law indicates that the Iraqi government “has the right to participate in the management of fields discovered before 2005, but the fields discovered afterward belong to the regional government.”[/size]
[size=45]The committee that was formed between Baghdad and Kurdistan to draft a draft law for oil and gas includes “the Minister of Oil, the Minister of Natural Resources in the region, the Director General of SOMO Company, and the advanced staff in the Ministry of Oil, as well as the oil-producing governorates such as Basra, Dhi Qar, Maysan, and Kirkuk,” according to the “INA” agency.[/size]
[size=45]The Iraqi Prime Minister, Muhammad Shiaa al-Sudani, said in early August that “the draft oil and gas law is one of the basic and important laws, representing a factor of strength and unity for Iraq, and it has been stuck for years, at a time when the country today is in dire need of its legislation and benefiting from this natural wealth.” “In all fields and sectors, in addition to the contribution of the legislation to solving many outstanding problems.”[/size]
[size=45]He explained that “there are governorates that have not invested their wealth to date, which is considered a negative thing for development endeavors in all their paths,” according to a report by the “INA” agency.[/size]
[size=45]The draft law and Kurdistan.
The dispute over the oil issue has been a major source of tension between Baghdad and Erbil for years. Last year, the matter reached the judiciary, as Erbil believed that the central government was seeking to seize control of the region’s wealth, according to an Agence France-Presse report.[/size]
[size=45]In February 2022, the Federal Court in Baghdad ordered the region to deliver the oil produced on its lands to Baghdad, and to cancel contracts the region had signed with foreign companies.[/size]
[size=45]The matter reached the point where the judiciary in Baghdad invalidated contracts with many foreign companies, especially American and Canadian companies.[/size]
[size=45]After years of exporting oil unilaterally via Turkey, the autonomous Kurdistan region must adhere, as of late March 2023, to an international arbitration panel’s decision that gave Baghdad the right to fully manage Kurdistan’s oil.[/size]
[size=45]As a result, exports from the region stopped. A temporary agreement signed between Baghdad and Erbil in early April stipulates that Kurdistan oil sales will be made through the Iraqi Oil Marketing Company “SOMO,” while revenues generated from the region’s fields will be deposited in a bank account with the Central Bank of Iraq or one of the banks approved by the Central Bank of Iraq.[/size]
[size=45]Head of the Media and Information Department of the Kurdistan Regional Government, Jutiar Adel, stressed the importance of legislating the oil and gas law “because this sector still operates without legal regulation and relies solely on the Oil Ministry law issued in the 1970s, which is not in line with the situation after 2003.” .[/size]
[size=45]He said in response to Al-Hurra website’s inquiries: “There is the Kurdistan region and provinces producing oil and gas, and since the management of this sector is entrusted to the federal government, the region and the producing provinces together, the law must be legislated in accordance with a common vision that expresses the articles of the constitution.”[/size]
[size=45]Adel warned against passing the draft law in a way that “expresses the will of one party individually,” as it must reflect the principle of “true partnership, and include mechanisms for the optimal use of Iraq’s natural resources, and the necessity of guaranteeing the rights of all parties in a fair manner and preventing the demise of one party at the expense of another party.” .[/size]
[size=45]“The biggest knot”
Iraqi Kurdish political researcher, Saman Nouh, said, “The biggest knot around the draft law is related to the powers of investment, extraction, and marketing between the federal government and the Kurdistan Regional Government.”[/size]
[size=45]He added in an interview with Al-Hurra website that the federal government wants “the law to ensure that it has the final say in extraction and marketing, that is, to effectively control oil sales and ensure that imports reach them exclusively, while the regional government emphasizes its right to extraction and marketing.”[/size]
[size=45]Not to mention, “there are disagreements related to the management of the new oil fields, as their management is in coordination with the federal government, and therefore the law needs to detail the meaning of coordination, how it occurs, its nature, and its timing,” according to Noah.[/size]
[size=45]Noah also points out disagreements regarding “the Federal Oil Council, which is supposed to govern the oil file, and these differences are not only related to the Kurdistan region, but also to the oil and gas producing provinces as well, and are represented in the powers of the council and who represents it, and the size of representation.”[/size]
[size=45]He believes that these controversial points have led, for years, to not decide on the law and postpone it, especially since it is related to the resource that constitutes more than 90 percent of the country’s imports, and its settlement requires political decisions.[/size]
[size=45]Noah asserts that after the Kurdistan region lost its “economic independence, he wants to legislate a fair and balanced law that is consistent with his interpretation of the constitutional rules and with the federal system that grants the region clear powers and does not impose the will of one party on the other. Therefore, he stresses that the law be issued by consensus and agreement on all the details.” .[/size]
[size=45]When will it be approved?
Representative Al-Muslimaoui said it was likely that the draft oil and gas law would be completed during “the current legislative term,” and he expected it to be approved in “the next legislative term after about four months.”[/size]
[size=45]For his part, a member of the Oil and Gas Committee, MP Nazem Al-Shibli, according to what he told the Al-Hurra website, does not believe that the “large political parties” in the Council will be able to resolve “important files,” such as the draft oil and gas law.[/size]
[size=45]He added that these parties use these “important files” as “electoral papers that allow manipulation of voters’ feelings, not to mention their economic returns and illegal contracts with international oil companies.”[/size]
[size=45]The Iraqi academic and economic analyst, Abdul Rahman Al-Mashhadani, does not see any real glimmer of hope for the approval of “the draft oil and gas law in the current draft, especially since its economic impact may harm the central government in Baghdad.”[/size]
[size=45]He explained in response to Al-Hurra website’s inquiries that if the law was passed in its current form, this would necessarily mean reducing treasury revenues, as every governorate would want to follow Erbil’s example that ownership of oil discoveries, after 2005, belongs to it, and a percentage of it is supplied to the treasury.”[/size]
[size=45]Al-Mashhadani believed that “if there is a real will to pass the law, the disputes must be ended with a consensual solution that satisfies and does not harm any of the parties concerned, and in a way that achieves a fair distribution of the governorates as a whole, and not just the oil governorates.”[/size]
[size=45]Comments on the draft law:
The Iraqi legal expert, Ali Al-Tamimi, believes that the draft law needs more details and clarification in some of its articles, and the inclusion of additional articles in order to reduce the need for subsequent interpretations of it.[/size]
[size=45]In response to Al-Hurra website’s inquiries, Al-Tamimi made ten observations on the draft oil and gas law, which include:[/size]
[size=45]01- The draft law consists of 53 articles, requiring the establishment of the Federal Petroleum Council, which is headed by the Prime Minister and includes ministers and representatives from the governorates. It is responsible for setting petroleum policies, issuing instructions for implementing contracts, approving exploration, development and production, and approving concluded contracts.[/size]
[size=45]02- The contracts must be signed by the Federal Ministry of Oil and approved by the Federal Oil Council within three months. However, the law did not specify the type of these contracts and it was preferable that they be service contracts only and not participation.[/size]
[size=45]03- The law needs to impose on contracting companies to employ Iraqis exclusively, as other producing countries do, “and this is important,” as he put it..[/size]
[size=45]04- The subject of contracts prior to the enactment of the law, it must be explicitly stipulated and the problem with the contracting companies must be resolved according to the principle of joint management of the two parties, that is, the federal government and the region, with the exclusive right of action for the federal government in accordance with Article 135 of the Civil Code.[/size]
[size=45]05- The draft law needs to explicitly stipulate the penalties affecting parties that conclude contracts in violation of this law, and also specify the regulatory authorities that have the right to review these contracts.[/size]
[size=45]06-The draft law must explicitly stipulate all petroleum derivatives, not just oil and gas, according to his opinion.[/size]
[size=45]07- The project must include the decisions of the Federal Court, which have become binding on all authorities, according to Article 94 of the Constitution, as he put it.[/size]
[size=45]08- The draft law is so important that it must be presented for public consultation by specialists before its final draft is drawn up.[/size]
[size=45]09- The details of the law must be expanded so as not to open the door to diligence when applying.[/size]
[size=45]10- The ministerial platform presented by the current government stipulates the necessity of legislating this law, and if approved, it will represent a major achievement on which to build.[/size]
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