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 Oil tensions rise again between Kurdistan and Iraq

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Oil tensions rise again between Kurdistan and Iraq  27.5.2011  
By Fiona Bond

May 27, 2011

ERBIL/BAGHDAD, In the week that Gulf Keystone Petroleum (GKP) said it was preparing to export up to 5,000 barrels of oil per day from its Kurdistan operations, Iraq's Deputy Prime Minister has poured cold water on the Iraqi oil law progress.

There had been considerably more optimism this year around the potential passing of an oil law by the central government in Baghdad, following an agreement between Prime Minister Nuri al-Maliki and the Kurdish factions.

However, according to reports this week, Deputy Prime Minister for energy affairs, Hussein al-Shahristani, has said the national oil law requires major changes, indicating further problems to come.

IHS senior Middle East energy analyst Samuel Ciszuk said on Thursday that        

An employee works at Tawke oil fields in the semiautonomous Kurdish region in Iraq's north. Photo: AP
Al-Shahristani's unease with the draft, which has apparently been agreed in a high level deal, suggests he is likely to counter it, despite it complicating wider political issues.

"Al-Shahristani is continuing his agenda of centralising control over the Iraqi oil and gas industry, although increasingly it looks as if he might be out of line in relations to his own Prime Minister and potentially may even be undermining the stability of the fragile coalition government," Ciszuk said.

The draft oil law was approved by the government back in 2007, but faced fierce opposition, mainly from the Kurdish factions.

Iraq is currently de facto still deploying the old oil law, which has been in place for decades, although it is somewhat out of sync with Iraq's constitution and the oil contracts issued to the international oil companies over the past few years, Ciszuk said.

The new Iraqi constitution handed Kurdistan greater power, allowing it to press ahead with the development of its own oil and gas reserves and successfully attract a host of international oil companies to its unexploited acreage.

However, this spurred a counter reaction from the more centralistic factions, with al-Shahristani previously flying the flag for national control over reserves and production and hailing the Kurdish contract as "illegal".

This prompted the Oil Ministry to add some annexes to the original oil law draft which hindered the Kurdistan activities, in effect calling a halt to the oil deals struck with IOCs and causing a bitter stalemate between the two sides.

"This lack of relevant and functioning oil law is complicating Iraq's ability to attract investment into exploration. This, however, does not seem to both al-Shahristani,
www.ekurd.netwho staunchly believes that an attractive enough TSC-based framework can be found in negotiations with IOCs and that a stable oil law framework is not necessary to move ahead," said Ciszuk.

"Whether the oil law is near to being nudged from the Iraqi government on the parliament floor is likely going to be indicated by even more vociferous opposition against it from al-Shahristani. The will of al-Maliki to push it through parliament is likely to be gauged in advance by his efforts to rein in his deputy premier, or even remove him, with reassurances over contract stability expected to be given to IOCs working in Iraq proper in advance, should the latter be the case," he added.

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