IRAQ: Iraqi lawmakers warn that next government may alter oil deals

Record ID: 343919

  • Title: IRAQ: Iraqi lawmakers warn that next government may alter oil deals
  • Date: 22nd October 2009
  • Summary: BASRA, IRAQ (FILE, 2009) (REUTERS-ACCESS ALL) VARIOUS OF OIL INSTALLATIONS
  • Embargoed: 6th November 2009 12:00
  • Keywords:
  • Location: Iraq
  • Country: Iraq
  • Topics: International Relations
  • Reuters ID: LVADNFBZ2T90BVZLGFN1QPBMNH9S
  • Story Text: International oil companies signing deals with Iraq are taking a risk that the contracts may be revise or cancel after next year's elections, says a senior lawmaker.
    International oil companies signing deals with Iraq are taking a big risk as the next government, to be elected in January, may revise or cancel those contracts, a senior lawmaker said on Tuesday (October 20).
    The warnings from lawmakers and uncertainty about who will win the upcoming January 16 election mean that firms striking a spree of deals, which could rock the balance of power among oil states, are unlikely to invest heavily before the vote, analysts said.
    "The government has to stop concluding deals with foreign firms. If it wants to sign a deal, it has to make a law for each contract and present it to the Iraqi parliament for approval, until the passing of the oil and gas law, which has a special mechanism for signing deals," said Ali Hussain Balou, head of parliament's oil and gas committee.
    Balou, a Kurdish lawmaker and sharp critic of Iraq's oil policy said there were no guarantees for the oil companies that the new government would follow the same path in dealing with them.
    "Without this law, these contracts will be null and they will be revised or cancelled when the law is enacted or after the coming election and the formation of a new government," he added.
    Iraq's cabinet last week approved a deal for BP and China's CNPC to develop the nation's biggest oilfield, Rumaila -- the first contract to emerge from a landmark auction in June and Iraq's first major oil deal since the 2003 U.S. invasion.
    The auction and a second round in December are aimed at more than tripling Iraq's current output of 2.5 million barrels per day as it desperately seeks the billions of dollars it needs to rebuild from decades of war and sanctions.
    The BP deal was the only one to be successful in the first round of tenders in June. But other agreements are near to being clinched with ENI, Exxon Mobil and others after Iraq's oil ministry sweetened its terms.
    Iraq is also close to sealing a development agreement with Nippon Oil for the Nassiriya super giant field.
    If all the deals come together, Iraq will catapult itself to third place among oil producers from 11th place now.
    Some analysts have argued that the flurry of deals are aimed at boosting the government of Shi'ite Muslim Prime Minister Nuri al-Maliki as it seeks re-election and tries to convince voters it has done a good job.
    But Iraqi lawmakers said they expected the next government to be cautious about the deals that Maliki's government has struck because they had not been approved by parliament. Modern hydrocarbon legislation clarifying the rules for foreign investment has been stalled in parliament for years. The government says that in its absence, the cabinet has the authority to approve oil contracts.
    Oil expert Farouq Mohammed Sadiq said he believed guarantees had already been given to the oil companies.
    "If we talk about guarantees, certainly there were guarantees. Otherwise, the companies would not have not started bringing in their equipment and taking the first steps to start work," he said.
    He said it would be very difficult for any future Iraqi government to try and cancel deals that had already been signed.
    "It is not possible that when the government changes and another government comes in, it will have the right by law or international law to break the contracts with these companies," he said.
    Iraq, which has the world's third largest oil reserves, is struggling to modernise its oil sector and is courting global oil majors for long-term development contracts.
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