Oil Minister Hussein al-Shahristani
(Click to Enlarge)

BAGHDAD (THE WALL STREET JOURNAL via Dow Jones), Nov. 9, 2009

A handful of lawmakers from the Iraqi parliament's oil and gas committee on Sunday questioned the legality of petroleum-development deals inked last week with BP PLC, Exxon Mobil Corp. and other big oil firms.

The opposition isn't likely to derail the deals, but it raises the specter of fresh political uncertainty for foreign oil executives, who have just recently warmed to the idea of investing in Iraq's vast but undertapped oil fields. Last week, the Iraqi Oil Ministry signed initial deals with consortia led by Exxon and Eni SpA, along with a final agreement with a consortium headed by BP and China National Petroleum Corp.

On Sunday, Noor Adin al-Hadyi, a member of the oil and gas committee, said those contracts needed approval by parliament. A broad petroleum law has long been stuck in parliament. The oil ministry fashioned the current contracts as limited, service deals to avoid having to get parliamentary approval. The current government green-lighted that decision.

But Hadyi said the committee could decide to take the issue to court to ask that the contracts be canceled.

"This is a warning to the companies that the contracts they signed are illegal," he said at a press conference.

Oil Minister Hussain al-Shahristani and Iraqi government spokesman Ali al-Dabbagh have both recently repeated their assertions that the contracts are legal without parliamentary approval.

The companies have said they considered their contracts to be valid, since they were signed in an Iraqi government-approved process. The deals involving Exxon and Eni still need final approval from the Iraqi cabinet.

There was some parliamentary opposition in the lead-up to Iraq's first oil-licensing round last June. But since then, criticism has been eclipsed by other parliamentary battles, including one over election legislation ahead of polls slated for January.

Iraq will hold a second bid round in December for 10 unexplored oil and gas fields. Exxon, Lukoil, CNPC and other oil giants are among the more than 40 companies that are eligible to participate in that auction.

Copyright (c) 2009 Dow Jones & Company, Inc.