Iraq Energy Roundup

Oil contracts illegal, Kurdish lawmaker says.

A veteran Kurdish lawmaker said the deals signed between the Kurdish and Iraqi governments with oil majors are illegal and premature.

The Kurdistan Regional Government and the Iraqi central government in Baghdad signed deals in recent weeks to develop the technical capacity in the oil sector in addition to several development contracts, but these deals are "a premature" move, says Mahmoud Othman with the Kurdistan Alliance, the major Kurdish party in the Iraqi Parliament.

Othman said both governments may be getting ahead of themselves in oil developments because lawmakers have yet to ratify a national law to govern the oil sector, the Iraqi daily Azzaman said.

"The rush toward signing the contracts is anachronistic. So long as the draft oil and gas law remains unsigned, these deals will lack the constitutional basis to kick them off the ground," Othman said.

He cautioned both governments to "wait until the draft oil and gas law is approved" before moving ahead with major oil contracts.

Iraqi oil infrastructure in shambles.

The infrastructure in the Iraqi oil sector is far less developed than that of the rest of the major oil-producing nations, the former oil minister said.

Former Minister Ibrahim Bahr al-Aloom said there needs to be a "sound basis of policies that oil be able to develop the infrastructure sector, to ensure the utilization of its revenue in the reconstruction of the country," the Iraqi Directory reported.

He said Iraq is "the only country" in the region to pursue the wrong policies regarding its oil and gas laws and called on Iraqi lawmakers to push for measures that include more technical expertise than political bickering.

Iraqi oil production could put an additional 500,000 barrels of oil on the world market, Aloom said, adding the "technical support contracts can contribute to enhance production from giant producing fields in two years and rise to around 3 million barrels by the year 2011."

The former minister said Iraq is unique in its position to put a large amount of reserves into the market in a short period of time, but noted the only way to realize those gains is by moving away from a centralized management plan regarding the energy and oil sector.

Oil contracts unjustly scrutinized.

There is undue scrutiny on the flurry of contract activity in the Iraqi oil sector because of the lack of a national hydrocarbon law, industry analysts say.

Iraq currently has no law to govern its oil industry, meaning there is no way to settle contract disputes. Furthermore, the crumbling infrastructure and the apprehension to send contractors to work in Iraq make any criticism of the latest developments in the Iraqi oil sector untimely, The Washington Independent said.

Iraqi Oil Minister Hussain al-Shahristani announced in June Baghdad awarded oil giants BP, Exxon, Shell and Total technical service contracts to work in the country.

The U.S. Department of Energy puts the pre-2003 estimate of Iraqi oil reserves at about 115 billion barrels, which does not include potential reserves in western al-Anbar province and possibly underestimates Kurdish capacity, the report said.

These developments neglect, however, the influence the Iraqi political climate has over the major oil companies more than the other way around, the report said. Without the hydrocarbon law, without security and without a revitalized infrastructure, the contracts may depend ultimately on the whims of Baghdad.

"The industry can't control the internal politics of Iraq," said Adam Sieminski of Deutsche Bank, "and that's what's preventing development."

Turkey talks energy cooperation with Iraq.

Turkey and Iraq explored joint energy developments and transporting Iraqi natural resources to European markets via new pipelines during a visit by the Turkish premier.

Turkish Prime Minister Recep Tayyip Erdogan visited top officials, including his Iraqi counterpart, Nouri al-Maliki, in Baghdad Thursday. The pair discussed the possibility of Baghdad extending drilling permits to Turkish companies and the transfer of Iraqi resources to Europe, the Turkish news agency Referans said.

Turkish officials also discussed reconstruction needed on the Kirkuk-Yumurtalik oil pipeline, which would boost the amount of oil reaching the Turkish port of Ceyhan in the Mediterranean Sea.

The two sides also discussed the possibility of constructing new electrical facilities and petrochemical refineries as well as power lines to increase Iraqi energy exports.