The federal government accuses Kurdistan Region of committing constitutional violations in its oil contracts
The ministry said in a statement today, that it "would like to point out that the financial terms of the service contracts prepared by the Ministry of Oil, which will be approved for redevelopment, comprehensive development or exploration in all licensing rounds, are the best compared to the financial terms of production-sharing contracts, whether it is for the state or foreign companies." (Contractor).
In the production-sharing contracts for the region’s fields, the contractor is given a share of the extracted oil, in addition to the freedom to dispose of his share of the produced quantities and sell them at the place and time specified by the contractor, and this violates Article 111 of the Constitution, which clarifies that oil and gas is the property of the Iraqi people, noting that Thus, the region authorized foreign companies to fully control the petroleum operations through the terms of the production sharing contracts for the region, as one of these clauses included “that the government and each contracting entity have the right and obligation to sell or dispose of their oil shares in kind”, meaning that the region’s government has granted the contractors The right to sell its share of the produced oil and pay the government’s share, as the opposite is supposed to be true.”
The company also stated in its statement that "this means that the principle of production control is in the hands of foreign companies, and this is in contrast to the service contracts for licensing rounds of the Federal Ministry of Oil, all the oil produced through licensing round contracts is sold by the Oil Marketing Company (SOMO) at prices competitiveness that generates the highest revenues for the Iraqi people.
The Federal Ministry of Oil said that it "would like to show that the financial terms of production-sharing contracts for the Kurdistan Region - Iraq compared to the financial terms of service contracts have achieved very high benefits and profits for foreign companies at the expense of the government due to the absence of the principle of transparent competition and the resort to a direct bilateral agreement with companies when referring these." Contracts, and this is contrary to what was approved by the Federal Ministry of Oil in the oil licensing rounds, which caused the loss of the opportunity to obtain the best commercial terms to maximize financial revenues from selling oil produced from the region’s fields, where the financial returns to the regional government constitute no more than 80% as an average after Deduction of production costs (the cost of producing a barrel of oil), while the financial returns for the first and second licensing rounds amounted to more than 94.5% to 96.5%, and as shown in the attached commercial plans, and that production costs are equal to (4) times the production costs in the licensing rounds of the Federal Ministry of Oil ".
On the other hand, “the regional government signed on itself, through production-sharing contracts, a contractual obligation to exempt contractors from taxes and allowed them to inflate their profits without imposing any kind of taxes or sharing those inflated profits, especially when oil prices rose globally, and this violates the tax law of 1982. (Amended) and its instructions,” according to the statement.
The Ministry of Oil concluded its statement that “the region did not adhere to the quotas allocated to Iraq under the OPEC agreements, which negatively affected the quantities of oil allocated to Iraq from the central and southern fields, and thus negatively affected the financial returns of the federal government, despite bearing its burdens by securing the salaries of its people in the region.”
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