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Iraqi Parliament to Discuss Kurdish Oil Contracts

Service : Economy
TEHRAN, May 7 (ICANA) – The Oil and Gas Committee of the Iraqi Council of Representatives will discuss the oil deals signed by the Kurdistan Regional Government with international oil companies during the past few years.
Saturday, May 07, 2011 9:06:40 PM
Iraqi Parliament to Discuss Kurdish Oil Contracts

The discussion is based on the Iraqi Ministry of Oil's objections and disagreements with the 40 Production Sharing Contracts (PSCs) the KRG has signed with oil companies after the decree of the regional Oil and Gas Law in mid 2007.

The contracts were not recognized by the Federal Oil Ministry, which it claims are illegal as the ministry is the sole government body authorized to sign oil contracts in the entire country, kurdishglobe.net reported.

The ministry, and its former Minister Dr. Hussein al Shahristani, argue that the federal oil and gas law constitutes the framework for oil and gas activities in the country and defines the rights and responsibilities of the central government and the regions. Because the contracts were signed before the decree of that law, they are illegal.

Kurdish Region authorities, on the other hand, claim they drafted the oil and gas law and signed all PSCs in full compliance and accordance with the Iraqi Permanent Constitution, and that all the oil and gas activities are conducted with that in mind.

Another subject of disagreement between the federal and regional governments was compensation for the oil companies working in the Region. Baghdad refuses to pay fees to the oil companies working in Kurdistan, while requiring the Region to return all revenues from the exports to the federal government, something which Kurds thought unfair and did not accept.

These issues and disagreements between Baghdad and Erbil have led to many problems in the past, including a halt in oil exports from Kurdistan Region for approximately two years. Exports resumed early this year as part of a temporary agreement between Iraqi Prime Minister Nuri al Maliki and Kurdish Prime Minister Barham Salih.

While the Oil Ministry and Al Shahristani believe the oil contracts should be rescinded and they should be re-signed with the federal government, according to its regulations, a member of the Iraqi Parliament who is also a member of the Oil and Gas Committee thinks the issue is not serious, and could be solved easily.

MP Furat al Sharei says that the Oil Ministry is "overreacting" to the issue. "All that needs to happen is the contracts need simple reviews to make sure they are within the legal framework set by the Oil Ministry," he said.

The Federal Oil Ministry last week renewed its rejection of the contracts awarded by the KRG to 40 companies, including Norwegian oil firm DNO, declaring them illegal.

It is expected that the discussions on the issue will be a positive step, as this might lead to the official recognition of the KRG contracts by the federal government.

Much of the confusion stems from the failure of the last Iraqi government to pass a new oil and gas law which would have seen the clearer demarcation of responsibilities of the different bodies. Currently, the Oil Ministry and the Federal Oil Council have overlapping roles.

The Oil and Energy Committee has, on the other hand, issued an official request to the government to postpone a new round of oil licensing.

Adnan al Janabi, chairman of the Oil and Energy Committee, told a Kurdish news agency that it issued a request to the Ministry of Oil and based on the fact that the national oil and gas law has not yet been approved. This means, according to al Janabi, there is a lack of clear structure, and the Ministry of Oil has not done enough research into the economic feasibility of possible licenses.

"The Oil and Energy Committee hopes the oil and gas law will be approved as soon as possible and that those looking to block it for political reasons understand how hard it is for the ministry to carry out its work without the law and the formation of a federal council," he said.

The ministry has already announced it will launch another round of licensing with the specific intention of pushing for more gas exploration rather than oil exploration. Iraqi Oil Minister Abdel Karim al-Leabee announced at the beginning of April his ministry's willingness to work with foreign companies dedicated to investing in 12 new exploration locations for oil and gas.

The Iraqi Oil Ministry announced in October 2010 it had increased the oil reserves by 24 percent to reach 143.1 billion barrels, up from 115 billion barrels.

In Kurdistan Region, on the other hand, oil companies believe daily oil exports from the Region could increase by 400 percent by 2015 to reach some 500,000 barrels per day. Currently, the Region exports around 120,000 barrels per day from the Taq Taq and Tawke oilfields.

According to Oil and Gas Magazine, while the oil issues between Baghdad and Erbil are still pending, Kurdistan Region is expected to raise exports to up to 1 million barrels per day in the next five days.

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