Iraqi Oil Min Warns Companies Against Deals Bypassing Central Govt

Apr 26, 2007 (Dow Jones Newswires)

Iraq's Oil Minister Hussein al-Shahristani Thursday warned international oil companies from signing oil contracts that bypass the federal government in Baghdad and the Oil Ministry, in a clear reference to deals signed by the Kurdistan Regional Government with a number of foreign firms.

"Foreign companies shouldn't sign any contract that isn't through the federal government (in Baghdad) and the oil ministry," al-Shahristani said in a statement handed to reporters.

"Any contract that is signed without the knowledge of the federal government is illegal," the minister said.

"The ministry warns companies against violating the Iraqi laws and they would be responsible of such behavior," the minister said.

Al-Shahristani didn't say specifically in his statement that he meant contracts signed recently by the KRG with some companies, but it was clear he meant them, for no other party other than the Kurds has signed contracts with foreign companies.

Last week, while Iraqi top officials, parliamentarians, technocrats and experts were holding a seminar in Dubai to discuss an oil and gas law that regulates foreign investment in the war-hit oil sector, Dana Gas (DANA.AD) of the United Arab Emirates signed a strategic alliance with Iraq's KRG along with its affiliate Crescent Petroleum to review the region's gas resources.

Al-Shahristani mentioned neither the Dana-KRG alliance nor a number of contracts signed over the past years by the KRG with some foreign companies such as DNO AS (DNO.OS).

According to Iraq's draft oil law, all contracts signed in the past should be reviewed to guarantee they are in line with it.

Al-Shahristani said in the statement that he had told representatives from OAO Lukoil (LKOH.RS) in Vienna last month that their contract with the former Iraqi government of president Saddam Hussein needed to be reviewed. He also told them that he had documents that prove that Saddam's government had canceled the contract.

Lukoil, Russia's top-producing oil company, struck an agreement with the former Iraqi leader in 1997 to drill at the West Qurna field, which is among the most promising in Iraq, with an estimated reserves capacity of 4 billion barrels of oil. Saddam severed the contract in 2002, however.

The minister made his remarks while meeting the Russian ambassador to Iraq Thursday, the statement said.

Russia's resistance to the 2003 U.S. overthrow of Saddam's government then complicated relations with the new U.S.-backed Iraqi government, while continuing hostilities in Iraq made Lukoil's attempts to begin developing the field even more difficult.

Al-Shahristani said that according to the current Iraqi law, all contracts should be signed by the federal government until the new oil and gas law is issued.

The draft law should be presented to the parliament this week for approval, the minister told reporters in Dubai earlier this month.

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