Moratorium on oil projects in Iraq

04 July 2011

Major gas deals could be blocked as Oil & Energy Committee looks to freeze all energy contracts until new oil legislation is passed

Iraq’s Oil & Energy Committee is taking on Abdulkarim al-Luaibi and his Oil Ministry.

Led by chairman Adnan al-Janabi, the group is lobbying MPs to vote for a moratorium on new oil contracts until the long-overdue oil law is passed. It is also pushing for the re-creation of the Iraq National Oil Company (INOC), which would take over some of the Oil Ministry’s duties.

If the moratorium causes further delay, Baghdad’s plans for a fourth oil licensing round … could be in jeopardy

The Iraqi Constitution, written in 2005 following the US-led invasion, contains several provisions that address, often in vague language, the control and distribution of natural resources.

However, the ambiguity of the document, at least in terms of oil and gas, has raised several points of contention, leading to deadlock between the federal government and the Kurdistan Regional Government.

The hydrocarbons legislation is designed to outline the role of the federal government, regions, national and international oil companies. Iraq has muddled through without it since the toppling of Saddam Hussain in 2003.

A draft law was proposed in 2007, but blocked by political wrangling in parliament. Four years later, there is little sign that Iraq is any closer to reaching an agreement.

If the moratorium causes further delay, Baghdad’s plans for a fourth oil licensing round – and more immediately the signing of a $12bn gas capture deal with UK/Dutch oil major Shell – could be in jeopardy.

Sources close to Shell have put forward persuasive arguments supporting the legal basis of the deal – dating back to Laws 21 and 22 of 1997, governing private and state companies. However, given the value of the deal and its vast scope, it will be difficult to avoid including the transaction in with all of the other laws governed by the moratorium. 

A MEED Subscription...

Subscribe or upgrade your current package to support your strategic planning with the MENA region’s best source of business information. Proceed to our online shop below to find out more about the features in each package.

Get Notifications