Iraq oil future uncertain after KRG law

IRBIL, Iraq, Aug. 7 (UPI) -- The Iraqi Kurds' oil law may spark more investment, but much still rides on a federal oil law that is not close to passage.

The Kurdistan Regional Government's Parliament approved a regional oil and gas law Monday, setting out guidelines for the exploration, development and production of oil and natural gas in its area. It also sets the stage for foreign and private oil companies to enter the market.

"It’s a milestone for Kurdistan," said J. Jay Park, a Calgary, Alberta-based energy legal expert at Macleod Dixon who has been following both the federal and KRG oil law closely, "as well in terms of development of Iraq's overall petroleum legal regime."

The federal government's law is stuck in negotiations -- mostly over central vs. local control issues and the extent of foreign participation -- and the KRG law could be seen either as a prompt to make progress in Baghdad or a threat.

The central government has claimed priority in setting the country's oil strategy and has criticized the KRG for moving forward on its own. The KRG has signed a handful of production-sharing agreements and other deals with smaller international oil companies, one of which Park represented.

"We do not want to be hobbled by the political paralysis in Baghdad," KRG Natural Resources Minister Ashti Hawrami told The Guardian.

The KRG law "is not likely to trigger a massive interest by major international oil companies, which will remain reluctant to face possible retaliatory measures by the Iraqi central government and be barred from future investment opportunities in other parts of the country," said Rochdi Younsi, Middle East analyst for the business risk firm Eurasia Group. "However, a number of smaller firms will consider the existence of this new legal framework as sufficiently legitimate to structure and protect their operations in the oil-rich province of Kurdistan."