KurdistanObserver.com

Iraq Faces Clash With Kurds Over Oil Deals

May 23, 2006

Financial Times 

Iraq’s newly appointed oil minister said on Tuesday that the central government should handle all contracts related to petroleum exploration and production, putting him on a potential collision course with the autonomous Kurdistan region which has recently begun to develop its own oil resources.

Hussein al-Shahristani also said at a Baghdad news conference that the country hoped to pass an investment law soon to bring in foreign investment to upgrade the country’s battered oil infrastructure.

“Any oil production, exports or exploration should be handled by the [Baghdad] ministry of oil,” said Mr Shahristani, a member of the Shia-led United Iraqi Alliance, in one of his first statements since a national unity government was announced at the weekend.

He had earlier said that Iraq’s new government needed to get “national agreement” from regional oil officials on ambiguous articles in the constitution governing investment.

Under their own interpretation of the constitutional articles governing oil resources, the northern Kurdistan regional government signed an agreement in November with a Norwegian company to begin the first new drilling in post-invasion Iraq. Since then, a Canadian and a Turkish company have also began drilling in the north.

Mr Shahristani also emphasised the importance of foreign investment, in statements apparently aimed at international companies concerned that a new government with a heavy component of Shia Islamists and Sunni Arab nationalists might draft legislation that limits the kind of contracts they might sign.

“There is [a] need to pass an oil and gas law to guarantee the right conditions for international companies to help develop the Iraqi oil sector,” he said.

Iraqi officials have estimated that the country may need as much as $25bn (€20bn, £13bn) to restore and modernise an oil industry ravaged by pre-war sanctions, post-war looting and sabotage, administrative lethargy and corruption.

Until now, Iraq’s succession of transitional and interim governments has prevented the creation of a national oil policy, while production has remained stagnant at about 2.14m barrels a day in April, less than the pre-war peak of 2.5m.