'We are in the process of re-establishing the INOC by basically merging NOC, SOC and the refining and drilling operations, which were part of INOC before it was restructured in the late 1980s,' says the source.

'We want to make the oil and gas sector more flexible. The current situation is not convenient, especially for upstream exploration. The proposed law will hopefully be approved soon, and then it will take us about three-four months to put it together. We hope that INOC will commence operations by the start of next year.'

The consolidation is a major development as Iraq seeks to boost its oil production, which has fallen to about 2 million barrels a day (b/d) from its year-high of more than 2.5 million b/d in March. The amalgamation of the companies into one giant integrated national oil company similar in shape to Saudi Aramcowas a key recommendation of the Coalition Provisional Authority (CPA), which sought to strip politics away from the day-to-day operation and management of the oil sector.

Established in mid-July, the SOGC has wide powers. Comprising the deputy prime minister, four ministers and the governor of the Central Bank of Iraq, it approves development plans for the sector, sets petroleum product pricing for the domestic market and maps out an oil marketing strategy. It also approves contracts with foreign investors (Iraq, MEED Special Report, 30:7:04, pages 30-31).