Areas of uncertainty for draft oil law
"There is concern that foreign oil companies might try to get better terms by playing the provinces against one another.
But some oil experts are skeptical of the significance of the measure.
'It will not mean anything on the ground,' says A.F. Alhajji, an oil economist at Ohio Northern University in Ada. As long as Iraq suffers from political instability, major oil companies will shy away. 'The situation is so bad no one in his right mind wants to go there to be attacked or nationalized a second time.'
. . . One sensitive provision allows 'production sharing agreements' (PSAs) with foreign oil firms. In theory, Iraq would retain ownership and ultimate control of the oil in such a deal. A PSA would merely grant the firm or consortium the right to explore, develop, and sell the oil, while getting a share of the oil extracted. History, however, is full of 'unequal' PSAs highly favorable to oil companies and less favorable to oil nations.
. . . In the future, Iraqi lawyers could . . . argue that any oil deal signed while Iraq was occupied was done under duress and thus was invalid, [said Alhajii]." [1]
"The law grants regions and regional oil companies the right to draw up contracts with foreign companies for exploration and development of new oil fields. It does not specify what kinds of contracts are allowed, thus making room for production sharing agreements (PSAs).
. . . One of its first tasks could be the consideration of the five PSAs signed by the Kurdistan Regional Government and foreign companies, as well as six outstanding PSA contracts between the Saddam regime and companies.
. . . The draft law is a key precursor to international involvement in Iraq's hydrocarbons sector, and many aspects of the law will be attractive to international oil companies (IOCs). Yet, a national framework for contracts and regulation is not sufficient to attract IOCs in the near term.
. . . The per capita distribution of funds will require a politically sensitive census to be undertaken.
. . . The Ministry of Oil and INOC [Iraqi National Oil Company] will struggle to recruit skilled hydrocarbons sector technocrats." [2]
"Sen. Joseph R. Biden Jr. (Del.) . . . has been lobbying to have language included in the emergency supplemental war spending bill that will prevent 'United States control over any oil resource of Iraq.'
. . . House Speaker Nancy Pelosi (D-Calif.), though, didn't see the bill as pressuring Iraq to privatize. 'Democrats support an Iraqi oil bill that fairly distributes revenues among the Iraqi people in a way that the Iraqi people decide is best for them,' spokesman Drew Hammill said.
. . . [Antonia Juhasz of Oil Change International] said that many Democrats don't seem to understand that pushing Iraq to meet Bush's benchmarks could unwittingly hand international oil companies a victory, a charge echoed by [Congressmembers Dennis Kucinich and Lynn Woolsey].
. . . For John van Schaik, an oil industry analyst with Energy Intelligence, the law is so obscurely written that it's hard to know what to make of it.
'It's written such that it's open to interpretation,' he said. 'Iraq will never accept a law that can be read as a privatization law, no matter how the Americans try to pressure Baghdad.' " [3]
sources
[1] Francis, David R. (Christian Science Monitor). Why Iraq's new oil law won't last. March 5, 2007 (commentary).
[2] Oxford Analytica. Iraq Oil Law Necessary But Not Sufficient. March 7, 2007.
[3] Grim, Ryan. (The Politico). Some Democrats Oppose Forcing Iraq To Accept Foreign Investment in Oil. March 27, 2007.
posted: monday, april 2, 2007, 8:41 PM ET
update: wednesday, april 4, 2007, 4:31 PM ET
tags: iraq oil law antonia juhasz production sharing agreement
But some oil experts are skeptical of the significance of the measure.
'It will not mean anything on the ground,' says A.F. Alhajji, an oil economist at Ohio Northern University in Ada. As long as Iraq suffers from political instability, major oil companies will shy away. 'The situation is so bad no one in his right mind wants to go there to be attacked or nationalized a second time.'
. . . One sensitive provision allows 'production sharing agreements' (PSAs) with foreign oil firms. In theory, Iraq would retain ownership and ultimate control of the oil in such a deal. A PSA would merely grant the firm or consortium the right to explore, develop, and sell the oil, while getting a share of the oil extracted. History, however, is full of 'unequal' PSAs highly favorable to oil companies and less favorable to oil nations.
. . . In the future, Iraqi lawyers could . . . argue that any oil deal signed while Iraq was occupied was done under duress and thus was invalid, [said Alhajii]." [1]
"The law grants regions and regional oil companies the right to draw up contracts with foreign companies for exploration and development of new oil fields. It does not specify what kinds of contracts are allowed, thus making room for production sharing agreements (PSAs).
. . . One of its first tasks could be the consideration of the five PSAs signed by the Kurdistan Regional Government and foreign companies, as well as six outstanding PSA contracts between the Saddam regime and companies.
. . . The draft law is a key precursor to international involvement in Iraq's hydrocarbons sector, and many aspects of the law will be attractive to international oil companies (IOCs). Yet, a national framework for contracts and regulation is not sufficient to attract IOCs in the near term.
. . . The per capita distribution of funds will require a politically sensitive census to be undertaken.
. . . The Ministry of Oil and INOC [Iraqi National Oil Company] will struggle to recruit skilled hydrocarbons sector technocrats." [2]
"Sen. Joseph R. Biden Jr. (Del.) . . . has been lobbying to have language included in the emergency supplemental war spending bill that will prevent 'United States control over any oil resource of Iraq.'
. . . House Speaker Nancy Pelosi (D-Calif.), though, didn't see the bill as pressuring Iraq to privatize. 'Democrats support an Iraqi oil bill that fairly distributes revenues among the Iraqi people in a way that the Iraqi people decide is best for them,' spokesman Drew Hammill said.
. . . [Antonia Juhasz of Oil Change International] said that many Democrats don't seem to understand that pushing Iraq to meet Bush's benchmarks could unwittingly hand international oil companies a victory, a charge echoed by [Congressmembers Dennis Kucinich and Lynn Woolsey].
. . . For John van Schaik, an oil industry analyst with Energy Intelligence, the law is so obscurely written that it's hard to know what to make of it.
'It's written such that it's open to interpretation,' he said. 'Iraq will never accept a law that can be read as a privatization law, no matter how the Americans try to pressure Baghdad.' " [3]
sources
[1] Francis, David R. (Christian Science Monitor). Why Iraq's new oil law won't last. March 5, 2007 (commentary).
[2] Oxford Analytica. Iraq Oil Law Necessary But Not Sufficient. March 7, 2007.
[3] Grim, Ryan. (The Politico). Some Democrats Oppose Forcing Iraq To Accept Foreign Investment in Oil. March 27, 2007.
posted: monday, april 2, 2007, 8:41 PM ET
update: wednesday, april 4, 2007, 4:31 PM ET
tags: iraq oil law antonia juhasz production sharing agreement
posted by eric at 6:46 PM
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