Iraq oil law (2007)
Encyclopedia
The Iraq oil law, also referred to as the Iraq hydrocarbon law, is a proposed piece of legislation submitted to the Iraqi Council of Representatives in May 2007.
The Iraqi government has yet to reach an agreement on the law. In June 2008, the Iraqi Oil Ministry announced plans to go ahead with small one or two year no-bid contracts to Exxon Mobil, Shell
, Total
and BP
— once partners in the Iraq Petroleum Company
— along with Chevron
and smaller firms to service Iraq’s largest fields. These plans were canceled in September because negotiations had stalled for so long that the work could not be completed within the time frame, according to Iraqi oil minister Hussain al-Shahristani
. Several United States senators had also criticized the deal, arguing it was hindering efforts to pass the hydrocarbon law.
, gave production share agreements (PSAs) to Russia
n and Chinese
companies which gave a profit percentage of less than 10 percent.
The Bush administration
hired the consulting firm BearingPoint
to help write the law in 2004. The bill was approved by the Iraqi cabinet in February 2007. The Bush administration considers the passage of the law a benchmark
for the government of Prime Minister Nuri Kamal al-Maliki.
One stumbling block is the unpopularity of the law, as it is perceived by the Iraqi people. An opinion poll conducted in 2007 by Oil Change International and other groups shows 63% of Iraqis surveyed would "prefer Iraq's oil to be developed and produced by Iraqi state-owned companies [than] by foreign companies". This goes some way to explaining why the law has stalled in the Iraqi parliament.
The central government would distribute remaining oil revenues throughout the nation on a per capita
basis. The draft law would allow Iraq's provinces freedom from the central government in giving exploration and production contracts. Iraq's constitution allows governorates to form a semi-independent regions, fully controlling their own natural resources.
would have exclusive operational control of just 17 of Iraq’s 80 known oil fields. Normally countries do not have the type of exclusivity that would leave two-thirds of known and unknown fields open to foreign control. However, operational control of the fields does not mean control of the money made from them, and a percentage of the profits will be going into Iraqi tax revenue. Iraq’s oil reserves are believed to be the second largest in the world after those of Saudi Arabia
.
Other analysts have claimed that the no-bid contracts to U.S oil companies constitutes as exploitation
since many non U.S companies would give the same service for shorter contracts and lower percentage of revenue
, Also the fact that the U.S is still occupying the country and making the hydrocarbon law one of the benchmarks for withdrawal led many to believe the U.S is applying pressure on Iraq to accept this law.
The Iraqi government has yet to reach an agreement on the law. In June 2008, the Iraqi Oil Ministry announced plans to go ahead with small one or two year no-bid contracts to Exxon Mobil, Shell
Royal Dutch Shell
Royal Dutch Shell plc , commonly known as Shell, is a global oil and gas company headquartered in The Hague, Netherlands and with its registered office in London, United Kingdom. It is the fifth-largest company in the world according to a composite measure by Forbes magazine and one of the six...
, Total
Total S.A.
Total S.A. is a French multinational oil company and one of the six "Supermajor" oil companies in the world.Its businesses cover the entire oil and gas chain, from crude oil and natural gas exploration and production to power generation, transportation, refining, petroleum product marketing, and...
and BP
BP
BP p.l.c. is a global oil and gas company headquartered in London, United Kingdom. It is the third-largest energy company and fourth-largest company in the world measured by revenues and one of the six oil and gas "supermajors"...
— once partners in the Iraq Petroleum Company
Iraq Petroleum Company
The Iraq Petroleum Company , until 1929 called Turkish Petroleum Company , was an oil company jointly owned by some of the world's largest oil companies, which had virtual monopoly on all oil exploration and production in Iraq from 1925 to 1961...
— along with Chevron
Chevron Corporation
Chevron Corporation is an American multinational energy corporation headquartered in San Ramon, California, United States and active in more than 180 countries. It is engaged in every aspect of the oil, gas, and geothermal energy industries, including exploration and production; refining,...
and smaller firms to service Iraq’s largest fields. These plans were canceled in September because negotiations had stalled for so long that the work could not be completed within the time frame, according to Iraqi oil minister Hussain al-Shahristani
Hussain al-Shahristani
Hussain Ibrahim Saleh al-Shahristani is the current Iraqi Deputy Prime Minister for Energy.Born in 1942 in Karbala, Iraq, Shahristani received a BSc in Chemical Engineering from Imperial College London in 1965, and an MSc from the University of Toronto in 1967, from where he also received a PhD in...
. Several United States senators had also criticized the deal, arguing it was hindering efforts to pass the hydrocarbon law.
History
The Iraqi oil industry had been completely nationalized by 1972. The government in the 1990s, under the presidency of Saddam HusseinSaddam Hussein
Saddam Hussein Abd al-Majid al-Tikriti was the fifth President of Iraq, serving in this capacity from 16 July 1979 until 9 April 2003...
, gave production share agreements (PSAs) to Russia
Russia
Russia or , officially known as both Russia and the Russian Federation , is a country in northern Eurasia. It is a federal semi-presidential republic, comprising 83 federal subjects...
n and Chinese
People's Republic of China
China , officially the People's Republic of China , is the most populous country in the world, with over 1.3 billion citizens. Located in East Asia, the country covers approximately 9.6 million square kilometres...
companies which gave a profit percentage of less than 10 percent.
The Bush administration
George W. Bush administration
The presidency of George W. Bush began on January 20, 2001, when he was inaugurated as the 43rd President of the United States of America. The oldest son of former president George H. W. Bush, George W...
hired the consulting firm BearingPoint
BearingPoint
BearingPoint is an independent management and technology consulting firm. Following a post-bankruptcy management buyout in August 2009, BearingPoint has been operated by its European management team and is organized as a partnership...
to help write the law in 2004. The bill was approved by the Iraqi cabinet in February 2007. The Bush administration considers the passage of the law a benchmark
Iraq withdrawal benchmarks
The Iraq withdrawal benchmarks are a series of benchmarks the U.S. Government under the Bush administration have asked the Iraqi government to meet before the withdrawal of U.S...
for the government of Prime Minister Nuri Kamal al-Maliki.
One stumbling block is the unpopularity of the law, as it is perceived by the Iraqi people. An opinion poll conducted in 2007 by Oil Change International and other groups shows 63% of Iraqis surveyed would "prefer Iraq's oil to be developed and produced by Iraqi state-owned companies [than] by foreign companies". This goes some way to explaining why the law has stalled in the Iraqi parliament.
Profit sharing
The new law would authorise production share agreements (PSAs) which guarantees a profit for foreign oil companies.The central government would distribute remaining oil revenues throughout the nation on a per capita
Per capita
Per capita is a Latin prepositional phrase: per and capita . The phrase thus means "by heads" or "for each head", i.e. per individual or per person...
basis. The draft law would allow Iraq's provinces freedom from the central government in giving exploration and production contracts. Iraq's constitution allows governorates to form a semi-independent regions, fully controlling their own natural resources.
Reduced role of state run company
The Iraq National Oil CompanyIraq National Oil Company
The Iraq National Oil Company was founded in 1966 by the Iraqi government. It was empowered to operate all aspects of the oil industry in Iraq except for refining which was already being run by the Oil Refineries Administration and local distribution which was also already under government...
would have exclusive operational control of just 17 of Iraq’s 80 known oil fields. Normally countries do not have the type of exclusivity that would leave two-thirds of known and unknown fields open to foreign control. However, operational control of the fields does not mean control of the money made from them, and a percentage of the profits will be going into Iraqi tax revenue. Iraq’s oil reserves are believed to be the second largest in the world after those of Saudi Arabia
Saudi Arabia
The Kingdom of Saudi Arabia , commonly known in British English as Saudi Arabia and in Arabic as as-Sa‘ūdiyyah , is the largest state in Western Asia by land area, constituting the bulk of the Arabian Peninsula, and the second-largest in the Arab World...
.
Criticism of the new law
Some critics have claimed that the new Iraqi Oil law is not needed since Iraq has the cheapest oil to extract. Also Iraq's oil refineries did not maintain any heavy damages during the Iraq war so the country is not in need for any serious development at the time.Other analysts have claimed that the no-bid contracts to U.S oil companies constitutes as exploitation
Exploitation
This article discusses the term exploitation in the meaning of using something in an unjust or cruel manner.- As unjust benefit :In political economy, economics, and sociology, exploitation involves a persistent social relationship in which certain persons are being mistreated or unfairly used for...
since many non U.S companies would give the same service for shorter contracts and lower percentage of revenue
, Also the fact that the U.S is still occupying the country and making the hydrocarbon law one of the benchmarks for withdrawal led many to believe the U.S is applying pressure on Iraq to accept this law.
See also
- Energy lawEnergy lawEnergy laws govern the use and taxation of energy, both renewable and non-renewable. These laws are the primary authorities related to energy...
- Iraq withdrawal benchmarksIraq withdrawal benchmarksThe Iraq withdrawal benchmarks are a series of benchmarks the U.S. Government under the Bush administration have asked the Iraqi government to meet before the withdrawal of U.S...
- Iraq Petroleum CompanyIraq Petroleum CompanyThe Iraq Petroleum Company , until 1929 called Turkish Petroleum Company , was an oil company jointly owned by some of the world's largest oil companies, which had virtual monopoly on all oil exploration and production in Iraq from 1925 to 1961...
- National Energy Policy Development Group
- Ray Lee HuntRay Lee HuntRay Lee Hunt inherited most of father H.L. Hunt's Hunt Oil Co. along with his three sisters. In 1982, Forbes magazine estimated Ray Hunt's family's total net worth to be $200 million. Ray made a huge oil find in Yemen in 1984. It took two years for Hunt, partnering with other companies, to lay a...
External links
- Republic of Iraq Ministry of Oil
- Text of law in English provided by the Kurdish Regional Government (PDF)
- Iraq oil law Detailed timeline at the History Commons
- www.iraqoillaw.com
- Price for oil