Iraq oil law deadline approaches

And as pressure on Iraq's Prime Minister Nouri Al Maliki's government to get its draft oil law passed intensifies, opposition is growing with critics calling for the law to be put on hold.

Critics line up

Grassroots opposition to the proposed law was revealed by calls from the 26,000 member Iraq Federation of Oil Unions to be included in discussions on the outline legislation. This followed a strike over bonuses in mid June that temporarily halted shipments of oil products from Basra, the country's main export outlet.

While the draft law allows provincial authorities to negotiate development contracts, subject to review by a federal oil and gas committee, almost all Iraqi oilfields for the moment are under the control of the Iraq National Oil Company, a body which itself is due to be re-incorporated.

Dhia Al Bakaa, a former head of the Iraqi state oil marketing organisation, has criticised the draft law as inappropriate before the future of the country's national oil company is decided and the security situation is brought under control.

Exactly how the INOC and the Oil Ministry are to be restructured remains to be seen. The law seems intended to transform Iraq's oil industry from a nationalised model closed to foreign companies except for limited, albeit very lucrative, marketing contracts, into a commercial industry, all but privatised, that is fully open to all international oil companies.

The Iraq National Oil Company would have exclusive control of just 17 of Iraq's 80 known oil fields, leaving two thirds of yet to be exploited areas open potentially to foreign control.

Iraq has some 27 fields in production and another 25 that are close to producing all under INOC control as well as 26 fields already identified but not yet exploited which could be offered to investors in dozens of new blocks.

Details of how oil revenues from new production will be disbursed have also to be decided. The draft calls for a distribution to provinces based on the size of the population in each of them.

Delays add to pressure

The impasse is causing impatience in the US since Washington is committed to a broad ranging review of its operations in Iraq by September.

American officials, including Vice President Cheney and Defence Secretary Robert Gates and others, during visits to Baghdad have stressed how important it is for Iraq to show progress not just in taking more responsibility for security matters but also in agreeing on vital constitutional and economic questions. The draft oil law is seen as a benchmark test.

The strike threat may have been a catalyst that will cause a new look at the draft law. If the dispute had not been resolved with a promise of an inquiry into grievances, much of Iraq's 1.6 million barrels per day production could have disappeared from export markets with a significant impact on global oil prices.