FACTBOX-Iraq's long-delayed energy legislation
Tue Dec 29, 2009 12:00pm GMT
By Missy Ryan
BAGHDAD, Dec 29 (Reuters) - Major energy legislation that would reset the rules for Iraq's oil and gas sector has been held up for years by political squabbles between majority Arabs and minority Kurds.
Even as Iraq moves ahead with a spate of giant oilfield deals with leading energy firms, the failure to pass the delayed legislation creates major legal questions that increase risks seen in these multi-billion-dollar projects.
At the heart of the impasse are Kurds' ambitions to keep control of their oil policy and to expand their largely autonomous northern region to include oil-producing areas.
Passage of the laws, which would set clear rules for foreign firms doing business in Iraq's oil sector, is seen as a litmus test for potential investment in other, even more needy sectors of Iraq's economy, like housing and agriculture.
Below are highlights from the four draft laws, which include one law providing a general framework for the energy sector, a revenue sharing law, a law related to a new national oil company and a final law reorganising the Oil Ministry.
Final drafts are certain to differ from the current documents, and some of what is contained in the versions described below conflicts with other laws passed since the energy drafts were written.
* There have been several drafts of the main oil and gas law, but a draft which appeared in 2007 appears to have garnered the most consensus in parliament.
* The law includes formation of a new state Iraq National Oil Company (INOC). The new national oil company would replace an earlier version of INOC, which was merged into the Oil Ministry under former Iraqi leader Saddam Hussein.
* The law would create a federal oil and gas council headed by the prime minister or a prime ministerial nominee.
The committee would also include the director of the Central Bank, the finance, oil and planning ministers, a minister from the northern Kurdistan region, heads of the state oil companies and a number of oil and finance experts.
The council would oversee energy policy and would have final say over oil contracts.
* Oil contracts could be brokered by the Oil Ministry, regional or provincial governments, or the INOC, but would require a sign-off from the federal council. Deals would not have to go to parliament for approval under the current draft.
* The general framework law would give primacy over certain oilfields to the INOC while others would be under the purview of regional authorities. The draft is to include annexes dividing up Iraqi oilfields along those lines.
The classification of fields under INOC or local control is a central point of contention between Arabs and Kurds and a significant impediment to passing the draft law.
* The draft sets out some steps for settling disputes with foreign firms, including the possibility of submitting a dispute to arbitration or 'the competent judicial authority'.
But Iraq is not currently a member of any global treaty for dispute resolution, which may be a worry for foreign firms sceptical about Iraqi courts.
* The draft would empower the parliament to approve global oil treaties Iraq signs with other countries.
REVENUE SHARING LAW
* The existing draft of this law would set up a central fund for oil and gas export receipts and taxes related to oil deals.
* Until a census is conducted to determine the distribution of Iraq's population, Kurdistan would get 17 percent share of revenues (it now gets 17 percent of budgeted expenditures) after subtracting the central government's 'sovereign expenditures,' which are undefined but might possibly include things like national defence, strategic projects and allocations to a rainy-day fund.
* Other areas of the country would receive a share of expenditures according their population.
* A commission including at least one Kurdistan representative would monitor funds entering and exiting the fund. An international accounting firm would conduct audits.
* The draft would also create a 'future fund', a rainy day account that would set aside an unspecified share of surplus resources "for the coming generations". There are questions, however, about how such money would be used.
CREATION OF IRAQI NATIONAL OIL COMPANY
* The new INOC would include the state-run North and South oil companies, which currently operate major fields like Rumaila and Kirkuk and are controlled by the Oil Ministry. The draft does not mention whether it would also include other state firms like Maysan Oil Company. Presumably it would.
* INOC would be responsible for operating producing fields assigned to it by the federal oil and gas council. It would also develop operations and management of discovered, undeveloped fields that are designated by the council.
* INOC would be able to broker drilling, export and production contacts.
* INOC would manage and operate the national pipeline network and ports in keeping with the framework law.
OIL MINISTRY REORGANISATION
* There is no written draft of a law that would overhaul the Oil Ministry yet available.
* Presumably, the law would define a much more narrow, regulatory role for the ministry once it is no longer controlling operating companies like the North Oil Company and the South Oil Company and once the federal oil and gas committee is given responsibility for signing off on oil deals.
http://af.reuters.com/article/energy...BrandChannel=0
http://af.reuters.com/article/energy...5BS0GK20091229
Tue Dec 29, 2009 12:00pm GMT
By Missy Ryan
BAGHDAD, Dec 29 (Reuters) - Major energy legislation that would reset the rules for Iraq's oil and gas sector has been held up for years by political squabbles between majority Arabs and minority Kurds.
Even as Iraq moves ahead with a spate of giant oilfield deals with leading energy firms, the failure to pass the delayed legislation creates major legal questions that increase risks seen in these multi-billion-dollar projects.
At the heart of the impasse are Kurds' ambitions to keep control of their oil policy and to expand their largely autonomous northern region to include oil-producing areas.
Passage of the laws, which would set clear rules for foreign firms doing business in Iraq's oil sector, is seen as a litmus test for potential investment in other, even more needy sectors of Iraq's economy, like housing and agriculture.
Below are highlights from the four draft laws, which include one law providing a general framework for the energy sector, a revenue sharing law, a law related to a new national oil company and a final law reorganising the Oil Ministry.
Final drafts are certain to differ from the current documents, and some of what is contained in the versions described below conflicts with other laws passed since the energy drafts were written.
* There have been several drafts of the main oil and gas law, but a draft which appeared in 2007 appears to have garnered the most consensus in parliament.
* The law includes formation of a new state Iraq National Oil Company (INOC). The new national oil company would replace an earlier version of INOC, which was merged into the Oil Ministry under former Iraqi leader Saddam Hussein.
* The law would create a federal oil and gas council headed by the prime minister or a prime ministerial nominee.
The committee would also include the director of the Central Bank, the finance, oil and planning ministers, a minister from the northern Kurdistan region, heads of the state oil companies and a number of oil and finance experts.
The council would oversee energy policy and would have final say over oil contracts.
* Oil contracts could be brokered by the Oil Ministry, regional or provincial governments, or the INOC, but would require a sign-off from the federal council. Deals would not have to go to parliament for approval under the current draft.
* The general framework law would give primacy over certain oilfields to the INOC while others would be under the purview of regional authorities. The draft is to include annexes dividing up Iraqi oilfields along those lines.
The classification of fields under INOC or local control is a central point of contention between Arabs and Kurds and a significant impediment to passing the draft law.
* The draft sets out some steps for settling disputes with foreign firms, including the possibility of submitting a dispute to arbitration or 'the competent judicial authority'.
But Iraq is not currently a member of any global treaty for dispute resolution, which may be a worry for foreign firms sceptical about Iraqi courts.
* The draft would empower the parliament to approve global oil treaties Iraq signs with other countries.
REVENUE SHARING LAW
* The existing draft of this law would set up a central fund for oil and gas export receipts and taxes related to oil deals.
* Until a census is conducted to determine the distribution of Iraq's population, Kurdistan would get 17 percent share of revenues (it now gets 17 percent of budgeted expenditures) after subtracting the central government's 'sovereign expenditures,' which are undefined but might possibly include things like national defence, strategic projects and allocations to a rainy-day fund.
* Other areas of the country would receive a share of expenditures according their population.
* A commission including at least one Kurdistan representative would monitor funds entering and exiting the fund. An international accounting firm would conduct audits.
* The draft would also create a 'future fund', a rainy day account that would set aside an unspecified share of surplus resources "for the coming generations". There are questions, however, about how such money would be used.
CREATION OF IRAQI NATIONAL OIL COMPANY
* The new INOC would include the state-run North and South oil companies, which currently operate major fields like Rumaila and Kirkuk and are controlled by the Oil Ministry. The draft does not mention whether it would also include other state firms like Maysan Oil Company. Presumably it would.
* INOC would be responsible for operating producing fields assigned to it by the federal oil and gas council. It would also develop operations and management of discovered, undeveloped fields that are designated by the council.
* INOC would be able to broker drilling, export and production contacts.
* INOC would manage and operate the national pipeline network and ports in keeping with the framework law.
OIL MINISTRY REORGANISATION
* There is no written draft of a law that would overhaul the Oil Ministry yet available.
* Presumably, the law would define a much more narrow, regulatory role for the ministry once it is no longer controlling operating companies like the North Oil Company and the South Oil Company and once the federal oil and gas committee is given responsibility for signing off on oil deals.
http://af.reuters.com/article/energy...BrandChannel=0
http://af.reuters.com/article/energy...5BS0GK20091229