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 Next Iraqi Oil and Gas Licencing round could legitimise Kurdistan Govt oil contracts

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Next Iraqi Oil and Gas Licencing round could legitimise Kurdistan Govt oil contracts  19.5.2011
By Shwan Zulal -

May 19, 2011

, Kurdistan region 'Iraq', The oil and gas laws in Iraq are set to be delayed once again and there seems to be no political will to resolve the issues holding back some companies investing in Iraqi energy sector. A dispute is brewing and this time is between the Iraqi parliament and Al-Maliki's (Nuri Al-Maliki, Iraqi Prime Minister) Government. Oil and Energy Parliamentary Committee headed by Adnan Al-Janabi appears to be trying to delay January round of Gas and Oil licence auction.

The parliamentary committee have threatened to take the issue to the lawmakers and try to block the government's attempt to go ahead with auctioning the licences before the Iraqi Petroleum law is in place.                                

Oil in Iraqi Kurdistan.
Al-Janabi, told Reuters that, "he had asked the Oil Ministry to postpone the auction but it had refused, and any contracts that resulted would be illegal."

He added that his committee would ask parliament to forbid "the carrying out of new bid rounds or the signing of any new contracts until the necessary petroleum legislation is passed". Iraqi oil ministry has issued a brief statement in response saying that the ministry is holding the auction in compliance with Iraqi laws. However, the committee has been threatening to ask parliament to pass a law preventing the government from signing any new contracts.

Referring to Kurdistan oil contracts, Al-Janabi, has been quoted by the news agency that the contracts needs to be "brought into line". Kurdistan Region has been in the centre of this political squabbling. There are nearly 40 companies operating in the region and their contracts with KRG (Kurdish Regional Government) has been and still in question. Although many international legal experts have rendered the contract constitutional and there has been political agreement. The position remains unclear and the latest remarks by Al-Janabi, does not make it any clearer.

The latest dispute between the Al-Janabi and Al-Maliki's government highlights the lack of political direction in Iraq. Nevertheless, if the government wins the argument -which is very likely as previous attempt to stop the auctions in Court has failed- and goes ahead with granting the new licenses in January without the oil and gas legislation, it will certainly give legitimacy to the KRG oil contract.

The argument against the validity of Kurdish oil contract has always been whether the contracts are constitutional. The constitution stipulates, oil and gas legislations must be passed to regulate the industry and grant licenses must be carried out accordingly. It is likely that the new round of licenses will go ahead as oil ministry planed and the Energy Committee in charge of the new legislation will oppose it. As Al-Janabi said,www.ekurd.netthe contracts will be "illegal" hence; the contracts are invalid and unconstitutional according to the committee. This will automatically set precedent and put the new and old contracts granted by the Iraqi government in par with contracts granted by KRG.

The process of granting KRG licences has been far from transparent, but it has brought expertise and money for a much-needed infrastructure in the region. Only yesterday, the Kurdish opposition were asking for more transparency from the Kurdish government when dealing with oil companies and their contracts. Granting licences to oil exploration companies and attracting investors have been successful in Kurdistan Region. Despite disagreement over the validity of the contracts in Baghdad, investors have poured money into the region in excess of $10Billion.

Investors in Kurdistan are somewhat reassured by the recent payment of outstanding amounts for exporting oil from Kurdistan, which was long overdue. Furthermore, Al-Maliki's attempt to grant licences without the oil and gas law being passed will politically make it difficult to render Kurdish contracts granted under the same conditions invalid while giving legitimacy to other contracts granted by central Iraqi government.

AL Janabi also told Reuters "If the Oil Ministry proceeds with its plans, it will not be acting legally, and any signing parties will do so at their peril". The uncertainty has spooked some investors and cast doubt on the future supply projection of the Iraqi oil production. The Iraqi government oil production targets by 2017 was 12 million barrel per day, but many experts and even ministers doubt this could be achieved, while the political turmoil continues.

Iraqis are suffering and have neither basic services nor security. Meanwhile, the country has been rundown by rampant corruption. Division and lack of trust among politicians has lead to incongruity and disagreement on how to sell the only commodity Iraq depend on and its main source of income.

Shwan Zulal is a Kurdish Blogger, a regular contributing writer for, interested in political and legal Reform in Kurdistan, KRG, Iraq and current Kurdish affairs, including oil exploration companies and relevant legislations. You may visit Zulal's website at

Copyright 2011


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