April 18, 2007

An oil law is vital for Iraq to attract investment from foreign firms to boost its oil output and rebuild its economy, but disputes that have dogged the lengthy law-writing process continue to simmer between regional and central governments.

"It will be ready next week to be presented to parliament," Hussain al-Shahristani told reporters in the United Arab Emirates. Around 60 Iraqi parliamentarians and experts met in Dubai to discuss the law that will give its regions rights to negotiate with global firms on developing oilfields.

Shahristani said he expected parliament to make no major amendments of the law, though some minor changes were possible.

He said that all political blocs in parliament had agreed to try to pass the law before the end of May, but the Kurdish Regional Government (KRG) said on Wednesday it would not sign up to some aspects of the law.

Ashti Hawrami, minister of natural resources in the semi-autonomous Kurdish region in northern Iraq told Reuters that annexes to the draft oil law that aim to wrest oilfields from regional governments and place them in the hands of a newly formed state-oil company were unconstitutional.

"The annexes as they are written now will not be accepted by the KRG," Hawrami said. "If I don't get the lion's share of fields (in the region) then it's a bad law. If the law dilutes regional control then it is unconstitutional."

"This law has to be in harmony with the constitution and if it isn't then it must be thrown in the trash," Hawrami said.

Still, Hawrami said he was confident that all sides could agree on the law if the national oil company's role was reduced.

Shahristani said the Kurdish regional government should have made its objections clear before the draft law was approved by the cabinet in February, although he admitted the appendices had not been studied in detail before the law was passed.

"Nobody is totally happy with this draft but this has been agreed to. This is the draft that had been accepted," he said.

He said he would listen to the Kurdish government's opinions at meetings in Iraq next week.

FOREIGN FIRMS

Shahristani said the draft law would be presented in a bundle that would include the oil and gas law, a law outlining the functions of the ministry of oil, another for Iraq National Oil Company and a fourth for oil revenue management.

The future role of foreign oil companies in Iraq has caused controversy but Shahristani said such concern was unfounded.

"The oil wealth of Iraq will remain under total control of Iraq. Under no circumstances will Iraq relinquish control over its natural resources," he said.

Former oil minister Thamir Ghadban said Iraq would have to look at different types of contracts with foreign oil companies to encourage investment, but added he did not think it needed to sign the sort of production sharing agreements the KRG had entered into with several foreign firms.

In February Iraq's cabinet endorsed the draft law, which is awaiting parliament's ratification, regulating how wealth from the country's vast oil reserves will be shared by its ethnic and sectarian groups.

The OPEC member has the world's third-largest proven oil reserves and needs billions of dollars to revive the sector after years of sanctions and war.

Shahristani said that model contracts would not be included in the draft law annexes. The federal council for oil and gas would develop those contracts later.

All major and minor oil companies around the world had shown interest in the future development of Iraq's oil and gas fields, he said. "We are talking about a huge potential here in terms of fields ready for development."

Shahristani said Iraq hoped to begin developing a large gas field in the western desert close to Syria in the second half of this year.