Iraq oil law (2007)

The Iraq oil law, also referred to as the Iraq hydrocarbon law, is a proposed piece of legislation submitted to the Iraqi Council of Representatives in May 2007.

The Iraqi government has yet to reach an agreement on the law. In June 2008, the Iraqi Oil Ministry announced plans to go ahead with small one or two year no-bid contracts to Exxon Mobil, Shell, Total and BP — once partners in the Iraq Petroleum Company — along with Chevron and smaller firms to service Iraq’s largest fields. These plans were canceled in September because negotiations had stalled for so long that the work could not be completed within the time frame, according to Iraqi oil minister Hussain al-Shahristani. Several United States senators had also criticized the deal, arguing it was hindering efforts to pass the hydrocarbon law.

History

The Iraqi oil industry had been completely nationalized by 1972. The government in the 1990s, under the presidency of Saddam Hussein, gave production share agreements (PSAs) to Russian and Chinese companies which gave a profit percentage of less than 10 percent.

The Bush administration hired the consulting firm BearingPoint to help write the law in 2004. The bill was approved by the Iraqi cabinet in February 2007. The Bush administration considers the passage of the law a benchmark for the government of Prime Minister Nuri Kamal al-Maliki. One stumbling block is the unpopularity of the law, as it is perceived by the Iraqi people. An opinion poll conducted in 2007 by Oil Change International and other groups shows 63% of Iraqis surveyed would "prefer Iraq's oil to be developed and produced by Iraqi state-owned companies [than] by foreign companies". This goes some way to explaining why the law has stalled in the Iraqi parliament.

Profit sharing

The new law would authorise production share agreements (PSAs) which guarantees a profit for foreign oil companies.

The central government would distribute remaining oil revenues throughout the nation on a per capita basis. The draft law would allow Iraq's provinces freedom from the central government in giving exploration and production contracts. Iraq's constitution allows governorates to form a semi-independent regions, fully controlling their own natural resources.

Reduced role of state run company

The Iraq National Oil Company would have exclusive operational control of just 17 of Iraq’s 80 known oil fields. Normally countries do not have the type of exclusivity that would leave two-thirds of known and unknown fields open to foreign control. However, operational control of the fields does not mean control of the money made from them, and a percentage of the profits will be going into Iraqi tax revenue. Iraq’s oil reserves are believed to be the second largest in the world after those of Saudi Arabia.

Criticism of the new law

Some critics have claimed that the new Iraqi Oil law is not needed since Iraq has the cheapest oil to extract. Also Iraq's oil refineries did not maintain any heavy damages during the Iraq war so the country is not in need for any serious development at the time. Other analysts have claimed that the no-bid contracts to U.S oil companies constitutes as exploitation since many non U.S companies would give the same service for shorter contracts and lower percentage of revenue.

See also

• Energy law
• Iraq withdrawal benchmarks
• Iraq Petroleum Company
• National Energy Policy Development Group
• Ray Lee Hunt

External links

• Republic of Iraq Ministry of Oil
• Text of law in English provided by the Kurdish Regional Government (PDF)
• Iraq oil law Detailed timeline at the History Commons
• www.iraqoillaw.com
• Price for oil