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Foreign fears
Iraq's Federation of Oil Unions, a group representing 26,000 workers in the sector, fears that foreign oil companies will gain too much access and even gain
control of the country's mineral resources.
Meanwhile, Kurdistan's regional authority has entered into a number of quasi-sovereign contracts with foreign oil companies to exploit discoveries in northern Iraq. These, it has declared, will be honoured in spite of an earlier declaration by Iraq's Oil Minister Hussein Al Shahristani that contracts signed before the new oil law is promulgated will be void.
It is a potentially explosive issue concerning control of revenues and also the fate of the northern oilfields and the region's main city, Kirkuk, home to Arabs, Turks as well as the majority Kurdish population.
Initial proposals envisaged a state-owned Iraq National Oil Company to manage new projects while an oil and gas council, possibly including non-Iraqi advisors, would regulate the industry.
The original outline stated that a newly constituted state oil company would have control of all the country's oilfields. Appendices to the first draft also granted INOC authority over 90 per cent of Iraq's crude reserves including those in Kurdistan.
The Oil Ministry admits different views on the role of the state-owned oil company, its relation with the ministry, as well as on existing and potential oilfields. The main amendment concerns the way in which revenues will be shared among Iraq's 18 regions.
Production sharing agreements
Government spokesman Ali Al Dabbagh says that the proposed legislation addresses the controversial question of production sharing agreements on a 'case-by-case basis'.
Such agreements involve large scale capital investment being underwritten by companies in specific projects which recoup costs when production starts and they subsequently divide revenues with the government. The essentially long-term nature of such deals allows an investing company to book the field's entire reservoir into its reserve portfolio.
Once a new law is passed, Oil Minister Hussein Al Shahristani says that 15 onshore oil and gas concessions will be auctioned with further licensing rounds following at six month intervals. But major international oil companies will want to assess data very closely with some estimates now questioning the true extent of the country's oil potential. Rebuilding Iraq's oil industry could take decades.
Iraq's oil production has plummeted from a peak of 3.7 million barrels per day to 1.8 million bpd in spite of a $1.7bn rehabilitation programme overseen by the US Army Corps of Engineers.
However, the true production figure is difficult to assess because of illicit trafficking and a lack of metering of oil passing through pipelines and into tankers. Up to 300,000 bpd is unaccounted for.
