Iraqi Govt Body Rejects Some Oil Law Clauses

AMMAN (Dow Jones Newswires)

The highest Iraqi government jurisdiction body has rejected some clauses of the controversial draft oil and gas law and urged the Cabinet to amend these provisions, according to a recent letter sent by the body, the State Shuraa Council, to the Cabinet and seen by Dow Jones Newswires Thursday.

"The Council sees that the powers of signing oil and gas contracts (with international companies) should be confined to the federal government because regions and governorates haven't enough experience to do so," the letter said.

According to a recent copy of the draft hydrocarbon law governorates and regions, namely the Kurdistan Regional Government in northern Iraq, can sign initial contracts to develop and explore oil fields in their own regions.

The draft oil and gas law was referred to the Shuraa Council in late February for checking after it was passed by the government of Prime Minister Nouri al-Maliki.

Officials of the Kurdistan Regional Government want to negotiate and sign oil and gas contracts with foreign companies away from the control of the central government in Baghdad.

The council, which consists of top Iraqi judges, said the Cabinet failed to provide them with models of contracts that were mentioned in the draft oil and gas law.

It also said that the duration of a contract mentioned by the draft law is too long. "It should be shortened." The draft law stated that duration of a production development contract, the equivalent of a production-sharing agreement, ranges between 20 and 30 years.

The council said in it its letter to the government that the draft oil and gas law shouldn't be enacted at this time when the Iraqi parliament is debating new amendments to the country's constitution particularly the clause concerning Iraq's energy resources.

The letter also said that the rate of government royalty set by the draft law which is 12.5% regardless of the quantity, quality and type of the produced hydrocarbon is less than the normal rate set by the Organization of Petroleum Exporting Countries which is 16%.

The State Shuraa Council comments added to growing opposition to the law. The country's strong oil unions in the south and its main political blocs such as the Sunni Accordance Front and the Iraqi Front for National Dialogue at the parliament as well as Shiites parties such as al-Fadhilia and the Sadrist movement oppose the current draft of the law.

The law is stuck in negotiations, mostly over a vaguely worded constitution that each side interprets differently. Kurds, in the north, want strong regional say in how the oil is developed. Sunnis and most Shiites want strong central control over the oil. The oil unions think the law is giving foreign companies too much access over their country's oil.

A group of 61 Iraqi former oil officials and experts, who sought refuge in neighboring countries to avoid the killings, wrote an open letter to the prime minister and lawmakers urging the law be put on hold until conditions improve and to allow further debate. Their letter came after a symposium they held in Amman Feb. 17. Some of their comments on the law are identical to those of the Shuraa Council.

Thamer al-Ghadhban, Iraq's oil and gas adviser to Prime Minister Nouri al-Maliki said in Istanbul Wednesday he expected the controversial law to be delayed by two more months before submitting it to parliament for final approval.

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