Middle East Economic Survey

VOL. L

No 30

23-July-2007

IRAQ

Open Letter To Iraqi Parliament On Hydrocarbon Law

The following is the translated text of a letter sent to the Iraqi parliament on 16 July regarding the draft oil and gas law. It was signed by 108 Iraqi oil professionals, and legal and financial experts. A similar letter was sent to parliament in March this year (MEES 19 March).

To: The President And Members Of The Iraqi Council Of Representatives,

During the last six months, public opinion, including us (oil experts and men of law and economics), have been occupied with the procedures and developments accompanying the oil and gas law. Many symposiums were held, the most important of which was that by oil experts in ΄Amman on 17 February 2007 which produced a number of comments and recommendations that were presented at the time to your council.

As everybody knows, the draft of the law went to the State Shura Council which, in a professional way, redrafted it linguistically. It also suggested some important notes to improve the efficiency of performance and implementation, and to ensure the interests of all the Iraqi people. But it did not tackle some other important aspects.

The Council of Minister on 3 July 2007 approved the draft law and referred it to your council for the purpose of discussing and enacting it. Although the final draft was not published, it was noted from the available information, as well as from the pronouncements of officials of the central government and the Kurdistan Regional Government that there are still differences concerning the four annexes, included in the law, that contain the classification of the producing fields, and the discovered but not yet developed fields that are situated near the production centers, to be under the auspices of the (Iraq) National Oil Company (INOC) that is to be created under the law – these differences resulted in the recommendation that the annexes be deferred later to the Federal Council of Oil and Gas to consider. This is a matter which, in our opinion, does not remedy this important issue.

It is worth noting that the Council of Ministers has lately referred to you the draft of the law for the distribution of financial resources (Revenue Sharing Law), through which an important part of the claim of the Kurdistan region can be handled. Hence, at the present time, the concentration should be on the discussion of this financial law, rather than the oil and gas law.

President And Members Of The Council:

After seeing the draft of the oil and gas law that was referred to you, we noticed that it does not differ in its essence from the first draft, aside from the noticeable improvement in its linguistic composition. The present draft has ignored the comments from the State Shura Council, as well as all other comments, such as those we formulated in the 'Amman symposium, and the symposiums held by the oil trade unions and the non-governmental organizations, in addition to many political blocs.

Emanating from our belief in the extreme importance of the oil and gas law to present and future of our dear country, we again urge you to expend your utmost efforts in enriching the law, and studying and checking it, to remove and remedy the sources of fault in it, seeking the help and expertise of Iraqi experts.

In accordance with the above, we would like to emphasize to your council the following observations:

1. Given our conviction of the need for a law to organize the upstream sector and its development, and due to its extreme importance, we emphasize the importance of acting steadily and not rushing to issue it before enriching it with more discussions and making amendments that ensure the interest of all the Iraqi people, and without ignoring the sector of processing industries (refining, distribution and gas processing) with the priority given to enacting the Iraqi National Oil Company law.

2. There are ongoing discussions aimed at amending the Iraqi constitution, including the items related to oil and gas. Hence we do not see, from the legal and technical point of view, the necessity to enact the law presented to you now, before the constitutional amendments are finalized.

3. Licensing contracts for exploration, development and production form the backbone of this law. Hence it is vital to emphasize the role of the Council of Representatives in the approval of such contracts – similar to what has been adopted in the rest of world. It is regrettable to notice that the authority of the council is restricted to the enacting of the law and the approval of international agreements only.

4. As for the four annexes attached to the law, they are of vital importance as well, so we emphasize to the Council of Representatives the necessity to discuss them as part and parcel of the proposed law. We emphasize also the role of the Iraqi National Oil Company and the necessity for it to undertake the responsibility of managing all the producing and discovered fields in a form that will safeguard the rights of the Iraqi people completely and not forsake any of the oil reserves in any contractual format to foreign entities.

5. We assert the importance and necessity to adopt a comprehensive central plan for the whole of Iraq to determine the priorities of exploration and development efforts, on an economic and technical basis prevalent in the oil industry. It is also necessary to recognize the importance of the regions and governorates participating in planning, implementation and management within a comprehensive vision that ensures the maximum benefits for all the people of Iraq.

6. The passing of this law without paying attention to the expected impact of competition between the regions and governorates, and ensuing conflicts, will definitely accentuate division, anarchy and chaos. The best example of this is the recent unilateral declaration by the Kurdistan Regional Government, offering 40 exploration blocks for foreign investment, without even waiting for the enactment of the federal law and without the existence of a comprehensive and approved central plan for the whole of Iraq, including the Kurdistan region.

Lastly, we call upon the President and members of the council to take a memorable historic stand that will be remembered and registered for them in protecting the interests of the all the Iraqi people and in defending the right of their sons, now and in the future.

Signatories: