New Iraqi Govt Should Not Challenge Oil Deals - Official

The Iraqi government that is formed following the country's March 7 legislative elections isn't expected to scrap or review the 10 deals Baghdad signed recently with international oil companies to upgrade one of the country's vast oil fields, a senior Iraqi government official said Monday.

"I don't think any new [Iraqi] government will challenge the legality of these contracts," Thamir al-Ghadhban, Iraqi Prime Minister Nouri al-Maliki's top energy adviser, told Dow Jones Newswires in an interview. "These contracts will stay as they are."

There has been some opposition to the oil contracts in the election campaign and some of the lawmakers of the current parliament had questioned the legality of these deals because they haven't approved them.

International oil companies, including oil majors, fear that the deals they signed with Maliki's government could be terminated by a new government which will be formed in the coming months.

Ayad Allawi, who heads the al-Iraqiya bloc and who has emerged as a top challenger to al-Maliki so far in the elections, had called for a review of these contracts.

"There is a lot of uncertainty...We don't know if our deals will hold in the new government or not...Are they legal? Shall we suspend work until a new government is installed? Every participating company is raising these questions," a company official said on condition of anonymity.

Ghadhban, who is also a former oil minister, said that according to the country's constitution enacted in 2005, the government isn't obliged to approve these contracts by law. "I personally like to see these contracts legislated by the council of representatives but that would have taken a longer time," Ghadhban said referring to a draft national oil and gas law which has been under debate in the parliament for years.

The energy adviser also said that any new government would need foreign investment in the Iraqi oil sector to generate more money to fix the war-hit infrastructure and communal services. "These deals will generate a lot of revenue and any new government will need these contracts to increase production."

Iraq, which sits on top of the world's third largest oil reserves, relies 90% on oil revenues to finance its national budgets.

There are other obstacles such as security. Companies aren't certain about the security situation after the elections. Some think that the security situation would deteriorate further after the elections because politicians are expected to wrangle for months to form a government.

The main Shiite group, the Iraqi National Alliance, appears split on the issue of the signed deals. The Sadists, led by one-time firebrand cleric Mustafa al-Sad, oppose these deals and say that Iraq can develop these fields relying on national efforts. While head of the Islamic Supreme Council of Iraq Amman al-Hakim has come out in support of the contracts.

Copyright (c) 2010 Dow Jones & Company, Inc.


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