Middle East Economic Survey
VOL. XLIX
No 20
14-May
IRAQ
Letter To The Editor
Iraq’s Draft Energy Law
Dear Sir,
I wish to refer to the opening article in last week’s MEES, “Hopes Of Meeting End-May Deadline For Iraq’s Oil Law Recede” (MEES, 7 May), in which Issam Chalabi rightly said it was a case of “Back To Square One.”
“Back to square one”, indeed, applies to both the Kurdistan Regional Government (KRG) and the Ministry of Oil positions. In my paper, published as an Op Ed in MEES on 30 April I said: “Unconstitutionally, some 26 discovered oil and gas fields (referring to Annex 3 of the latest draft petroleum law) have not been allocated to INOC and have thus been passed on to the regions and provinces at a time when these lack the institutions and expertise to negotiate or take complex managerial and technological decision. It is indeed questionable whether the regions and provinces could manage efficiently to develop, let alone manage well, Iraq’s potential reserves of some 215bn barrels.” These observations were not made in a vacuum but were based on the constitution interpretation which has governed the federal government position and, seemingly, KRG has fallen into the same position though at the cost of some damaging concessions to the nation and the optimal oil management of the resource. The legal interpretation I am referring to “equates the discovered fields to the producing fields.” I quote below the relevant text.
“Limitation On Present Fields”
The principal negotiators of Article 112 First appear to agree that that the management authority provided by the section does not apply to all gas and oil resources. Rather it extends to oil and gas “extracted from present fields.” The phrase needs to be broken up into its component parts. Nothing in the Constitution suggests that “field” should be given anything but its ordinary understanding in the petroleum industry and in Iraq. The Society of Petroleum Engineers defines field as follows:
Field – An area consisting of a single reservoir or multiple reservoirs all grouped on, or related to, the same individual geological structural feature or stratigraphic condition. The field’s name refers to the surface area, although it may refer to both the surface and the underground productive formations.
In Iraq various areas and structures have historically been identified as fields, eg, the Rumaila field, the Kirkuk field.
But the controversy surrounds the qualifier “present”. Some, including certain Kurdish authorities, have construed “present” as meaning “presently producing” or “presently capable of being produced.” The difference is not trivial. In the absence of other limiting language, however, “present” should have its ordinary meaning of “existing.” There is still the issue of present when? Most people seem to believe that it meant existing at the time of the compromise or perhaps more precisely when the Constitution came into effect.
Regional Power To Nullify Decisions Pursuant To Article 112
The Constitution does give the regions and the governorates certain powers to modify or nullify federal legislation, but neither can be reasonably read to apply to Article 112. Article 115 provides: “All powers not stipulated in the exclusive powers of the federal government belong to the authorities of the regions and governorates that are not organized in a region. With regard to other powers shared between the federal government and the regional government, priority shall be given to the law of the regions and governorates not organized in a region in case of dispute.”
Since the powers in Article 112 do not appear in the list of exclusive powers of Article 110, the first sentence in Article 115 could be read to give the regions and governorates authority in the areas covered by Article 112. This construction, however, would make Article 112 a nullity and thus cannot stand. The second sentence of Article 115 applies by its terms to the “shared” powers of the regional government and the federal government. The shared powers are specifically dealt with in Article 114 and this reference should be limited accordingly to the powers set out there.
Article 121 Second also gives the regions certain powers: “In case of a contradiction between regional and national legislation in respect to a matter outside the exclusive authorities of the federal government, the regional power shall have the right to amend the application of the national legislation within that region.”
Nevertheless, this article does not apply to the activities of Article 112 as this is not an area where the regional government has authority to adopt legislation. This section only applies to those areas where the federal and regional governments have shared competency. These areas are set out in Article 114, and it is in these areas where there is conjoint legislative authority that the regional government pursuant to Article 121 has the limited authority to modify the federal legislation operative in its region. To hold otherwise would again make Article 112 a nullity, not only nullifying the federal authority but also the rights of the other producing governorates and regions to participate in the policy formation provided for by Article 112.
Yours,
Tariq Shafiq