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Iraq's parliament could still pass a draft
oil law within weeks
2.5.2007 |
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May 2, 2007
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ANALYSIS
BAGHDAD, May 2,-- Iraq's parliament could
still pass a draft oil law within weeks, but a
dispute between the central government and Kurdish
officials has worsened a foreign investment climate
already damaged by spiralling violence.
Iraq's central government and autonomous, oil-rich
Kurdistan are at loggerheads over legislation that
will decide control of the world's third largest oil
reserves.
The two sides will meet as early as the weekend to
try to reach an agreement Washington says is key
towards reconciling Iraq's warring sects and ethnic
groups.
But analysts and Western oil officials said that
even if parliament rubber-stamps the law, a
perceived lack of legal clarity and poor security on
the ground means it will take years for Iraq to
develop an environment conducive to business.
An oil law is vital to securing foreign investment
to boost Iraq's oil output, stuck at around 2
million barrels a day, and rebuild its shattered
economy.
"Lack of security is already keeping out the
international oil companies and the added public
objections to the oil law will make the situation
even worse," said Muhammed-Ali Zainy from the
London-based Centre for Global Energy Studies.
"Who would dare come to Iraq to develop and explore
when they know there is widespread resentment
towards them, the oil law and the constitution?"
A senior Western oil executive said major oil
companies will not jump to invest in Iraq until they
see a stable government, security on the ground and
legislative clarity.
"We're not going to drill and produce oil for Iraq
when we aren't sure of how it will get sold," he
said. "We won't sign at any price -- not with
billions of dollars at stake."
For political reasons, however, companies from
China, Russia and India might be willing to sign
oilfield contracts, he said.
DEADLINE
Deputy Prime Minister Barham Salih, chief architect
of the landmark draft oil law, said he hoped Baghdad
and the Kurdish regional government will reach a
compromise when they meet after an international
conference on Iraq in Egypt on May 3-4.
"There are some points of contention regarding the
appendixes and the oil revenues management law. I
think that all players should be patient but
determined to resolve these problems," he told
Reuters on Tuesday.
"We have a deadline. I think all the key leaders
recognise we need to solve this problem."
The draft, passed by the cabinet in February and
hailed at the time by Prime Minister Nuri al-Maliki
as a pillar of Iraqi unity, did not formalise
divisive issues such as how revenues would be shared
and who would control discovered but undeveloped
oilfields -- the federal or regional governments.
Those details were to be clarified in the annexes.
Most of Iraq's proven oil reserves are in the
Shi'ite south and in the Kurdistan north.
Ashti Hawrami, minister of natural resources in
Kurdistan, has said annexes in the oil law are
unconstitutional because they would wrest oilfields
from regional governments and place them under a new
state oil company.
Kurdish officials, who have warned they will try to
block the draft law in parliament, have signed deals
with foreign oil companies -- including
production-sharing agreements -- despite widespread
criticism from Shi'ite and Sunni Arab nationalists.
Last week, the ministry of oil in Baghdad warned
regions against signing contracts until the law was
passed.
Mustafa Alani, from the Gulf Research Center in
Dubai, said even if parliament approves the law the
dispute has raised serious questions over its
implementation and fanned fears it could tear the
country apart.
"The oil law is seen by many Iraqis as dangerous.
It's been controversial from the beginning," Alani
said. "To survive, it must be regarded as legitimate
and there must be security on the ground."
Another Western oil company source said Baghdad has
a long way to go when it comes to opening up the
country's oilfields.
"I see an oil crawl, rather than an oil rush," he
said.
Reuters
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