Kurdistan Observer

Iraq Officials Reach Tentative Oil Law Deal

Dec 20, 2006-Reuters - Iraqi officials have reached a tentative deal on an oil law that would allow the regions to negotiate oilfield contracts with foreign investors but gives the central government the final say.

Iraq desperately needs foreign investment to revive its shattered economy, which relies heavily on oil export revenues.

The country straddles the world's third largest oil reserves.

Sources close to the negotiations said Prime Minister Nuri al-Maliki has "signalled his approval" of the draft, but the law still awaits political approval and endorsement by the cabinet.

The sources said the law calls for the formation of a national oil council -- led by either the prime minister or his deputy -- that will have the authority to reject oilfield deals.

"Regions will be negotiating in accordance with specific parameters and investment models decided by the national oil policy council ... in the presence of a representative of the national oil body," one of the sources said.

"If rejection happens and the region insists on the contract, a body of (independent) experts will arbitrate." The oil minister, central bank governor, a representative from each region and oil, finance and economy experts will serve on the council, the sources said.

"The Kurdish regional government has accepted to review its existing contracts so that it will become consistent with the law," a source said.

The industry desperately needs foreign investment to revive Iraq's shattered economy, which relies heavily on oil export revenues.

The contracts issue is vital to Iraq's future as a solution favouring the regions would devolve power over its most valuable resources to the majority Shi'ites and the Kurds whose regions are home to the country's most coveted oilfields.

Minority Sunni Arabs, who were the dominant group under Former Iraqi Leader Saddam Hussein before the U.S.-led invasion in 2003, fear regional devolution will leave them with nothing.

"Contracts will not become effective unless the national body does not reject it. If the national policy council were to reject any draft contract within a specified period of 60 days then the contract will not be effective," the sources said.

The sources said the law calls for Iraq's two national oil companies to be turned into a holding company with operational affiliates to manage different aspects of the industry.

It also says oil policy would be set nationally and the ministry of oil would be restructured and transformed into a regulatory body.

All revenues would be deposited into a single national account.

Iraqi officials have said the law will be delivered to the parliament for ratification by the end of December.

But the legislation is likely to be finalised early next year because of the holiday season, the sources said.