Iraq’s parliamentary oil and gas committee is attempting to delay efforts by the Oil Ministry to launch a fourth oil and gas licensing round planned for January 2012, arguing that its legal foundations are unsound without the establishment of an Iraqi hydrocarbon law.

Oil Ministry spokesmen insist the auction, which covers 12 exploration blocks across the country, will go ahead as planned, despite growing opposition from the committee chaired by Adnan Janabi.

A draft hydrocarbons law has been proposed since 2007, but has yet to be passed by parliament. As a result, Iraq has had to rely on Saddam Hussain-era laws to develop its oil sector. Parliament is currently in recess until mid-June, but Janabi has hinted he will push for parliament to formally block the bid round.

Janabi’s criticism extends beyond the fourth round to contracts signed under the first three rounds, and even to future contracts. The eleven deals awarded to international oil companies (IOCs) were approved by Iraq’s cabinet, but not by parliament.

Iraq’s courts have already dismissed legal challenges to contracts. In April 2010, the courts ruled against Sheda Musawi, a former parliamentarian who challenged the Rumaila oil field licence awarded to UK oil major BP and China National Petroleum Corporation (MEED 29:4:10).

“I think this is larger than what we have seen before.  It seems to have more traction and seems to be better organised communication than Musawi, or other individual parliamentarians,” says one Baghdad-based legal source. 

IOCs should be worried, says the source. The Oil Ministry’s heads of agreement with UK-Dutch oil major Shell for the South Gas project will be a test case.

“This deal has been stalled for years now and is now being redebated within the Oil Ministry. If the Oil Ministry, Janabi and [prime minister, Nouri] al-Maliki come out in concert that this needs to be ratified, then there is a real problem.” 

The Oil Ministry under Hussain al-Shahristani has consistently argued that parliamentary ratification is not necessary. Stepping back from this position on the South Gas project would mean other contracts are at risk. However, sources close to the Shell deal say Iraq’s current power shortages mean it looks likely to go ahead.

“It is coming back online and coming back quick,” says one source. “Probably because this does not involve remuneration fees and Opec production quotas.”