This week's meeting of the Iraqi Oil Ministry with international oil companies in Istanbul begins a three-month series of gatherings, organized by the government or government workers, aimed at clearing through the turmoil of revitalizing Iraq's oil and gas sector.
In the aftermath of a major showing in provincial elections this month by Prime Minister Nouri al-Maliki and his Dawa Party's affiliates and allies, the politics of Iraq's most vital economy will be exposed to the run-up to national elections later this year.
Since the U.S.-led invasion toppled the strong-arm Saddam Hussein's government, Iraq's appointed and elected officials have clearly outlined the end goal -- increasing oil and gas production in the next 10 to 15 years to a level whereby all domestic needs for fuel and electricity are met and excess can be exported.
The means to this end are still undecided. The role of foreign and private oil companies has not been decided. Neither has the extent, if any, to which oil policy and development will be decentralized and controlled locally.
Without a new set of hydrocarbons legislation, as called for in the 2005 constitution, Baghdad is then tasked with carrying out oil policy in the "new" Iraq by adapting Saddam-era regulations that are still in place.
Pre-qualified oil companies will be able to bid on developing oil and gas fields selected by the Oil Ministry as part of a series of tenders. The terms of the contracts are not clear, and interested oil companies -- including the largest in the world -- have expressed concern. The ministry's meeting in Istanbul is aimed at clarifying the process. Eight oil and gas fields are to be awarded by June and another 11 fields by the end of this year.
The ministry is also running into trouble with parliamentarians who say a contract signed with the Chinese National Petroleum Corp. to develop the Ahdab field did not include the necessary transparency and government approval. The same alarm has been raised over direct negotiations -- like the CNPC deal, not part of the open bidding process -- with Royal Dutch Shell to develop natural gas and taking only three bids -- from Japan's Nippon Oil, Italy's Eni and Spain's Repsol -- to develop the Nasiriyah oil field.
Maliki has called on Iraqi and non-Iraqi oil experts in and out of the country to meet in Baghdad a week after the Istanbul meeting with oil companies. A source tells United Press International few Iraqi expats will attend. The meeting has been heralded by Deputy Prime Minister Barham Saleh, one of the national leaders of Iraqi Kurds, who is Oil Minister Hussain al-Shahristani's most vocal critic.
Likely the main topic at the meeting is a report by Saleh and his ad hoc committee to examine oil production problems in southern Iraqi oil fields. According to the Middle East Economic Survey, an industry publication, the report blamed the ministry's cumbersome contracting procedures and lax executive action, and called for a new committee to streamline investment. The new committee would be led by the former head of the South Oil Co., Jabbar al-Laibi. Shahristani removed Laibi in a controversial move that ended with a compromise of Laibi being made a southern oil adviser.
Shahristani is politically independent, but he pledged to Maliki's political alliance prior to the provincial elections, likely solidifying his support from Maliki in oil strategy. Notably, the Middle East Economic Survey reports, committee member Thamir Ghadhban, currently top Maliki adviser and twice post-2003 oil minister, did not give a final sign-off on the critique.
There are also plans for conferences -- one organized by the office of President Jalal Talabani (a major Kurdish politician), the other by the Ministry of Planning on non-oil economic development -- which could turn into additional space for critics of the Oil Ministry policy as either too reliant on international oil companies or too centralized.
In mid-March, a historic meeting of Iraqi workers is scheduled in Erbil, Iraq. Banned by Saddam Hussein, trade unions representing workers in the oil, electricity, construction, port and teaching trades have organized to demand back and increased pay, fight privatization and foreign workers, and defend other workers' rights. The most vocal and organized of the newly formed unions are the oil workers, who have kept foreign firms from operating refineries and threatened to stop production if international oil companies are given too great an access to oil and gas reserves -- a thorn in the sides of both Shahristani and Iraqi Kurds.
Attendees of the International Labor Conference in Iraq will include members of U.S. Labor Against the War, a coalition of American unions, and Iraq Veterans Against the War, a growing group of American military members turned war opponents and the only non-union representation. This meeting will likely rejuvenate the unions of Iraq.
Meanwhile, the United Nations' Iraq mission and Office for Project Services and the European Union are planning with the government of Iraq and the Kurdistan Regional Government of Iraq an April "roundtable on federalism and hydrocarbon management," according to a source who asked not to be identified. The conference is still in the planning process, UPI is told. "The Iraq Oil Law is not the primary subject of the roundtable."
The draft oil law is still in the legislative process, stalled by hard-core differences between those who favor decentralization, such as the KRG, and Maliki's centralized prerogative. The KRG has signed dozens of oil deals on its own that are called illegal by Shahristani.
The law would set out a framework for regulating the oil and gas sector and was a top priority for the Bush administration. Its insistence on the Iraqi government passing the law, however, exacerbated an already tense political power struggle and overshadowed three related laws that could have helped mitigate the problem:
-- A revenue-sharing law would determine how state income -- of which oil sales account for more than 90 percent annually -- would be collected and redistributed throughout the country.
-- The Iraq National Oil Co., which operated Iraq's oil and gas sector until it was disbanded by Saddam Hussein in a consolidation of power, would be reconstituted as the primary developer and operator. When INOC was canceled, various smaller companies operating the oil sector came under the auspices of the Oil Ministry.
-- The Oil Ministry would be reorganized as a regulator of the oil and gas sector, not engaged in the business of the oil industry.
All three laws are even further behind in the legislative process than the oil law.
Meanwhile, Iraq's oil exports struggle to reach 2 million barrels per day. The economic crisis and the drop in oil prices are putting pressure to pick that up. But billions of dollars are needed to fix infrastructure and damaged fields, let alone develop new projects, and there's no consensus on how to treat the international oil industry, which is anxious for access to the world's third-largest oil reserves.
With parliamentary elections slated for November, the oil question will loom large. The winner of the vote could alter leadership of the country, choose a new oil minister, and determine oil policy for the foreseeable future.
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