Thread: Archive Latest News - Think Tank - 16/08/07 - 03/11/07

Petro Showdown

06.09.07

April 2003: Saddam Hussein is on the run, and the sky over Baghdad is choked with black smoke as looters ransack and torch government buildings. But in one district, U.S. Marines stand guard on the steps of a large modern building, their weapons trained on the street and the footbridge outside. It is the Ministry of Oil. Let this treasure chest burn, the thinking goes, and Iraq goes with it.

Through more than four years of catastrophic violence in Baghdad, the building has survived intact. But a far quieter battle now rages inside its walls, one that could ultimately prove as critical to Iraq's future as the war: how to reorganize the country's mammoth oil industry after nearly 25 years of Saddam's dictatorship, international sanctions and bloody conflict. Oil revenues, which are potentially worth $70 billion a year--virtually all of Iraq's export earnings--are desperately needed to rebuild the shattered economy and end its overwhelming dependence on Washington. And oil companies from ExxonMobil to China National Petroleum Corp. are elbowing for position.

With stakes this high, Iraqi politicians have fought bitterly for more than a year over a new "hydrocarbon law," drafted last summer by veterans of Iraq's oil industry. The legislation is up for a vote in parliament when the fractious government resumes work after a bloody summer. Prime Minister Nouri al-Maliki has vowed to pass the law after delaying the vote twice this year; he is under intense pressure from President George W. Bush to produce results, as support for his leadership withers at home and in Washington. The vote is scheduled to take place just as Congress receives a progress report by the U.S. military commander in Iraq, General David Petraeus. If the fractiousness continues, however, well-armed regional powers could assert control over the wealth under their turf, adding economic momentum to a national bust-up.

U.S. officials have frequently cited the oil law as a key marker of progress, essential for building Iraq's future--and so setting a date for U.S. withdrawal. Without it, oil companies are unlikely to plow in the billions of exploration dollars Iraq needs because they will not be certain of the financial terms. "There is an enormous amount of pressure to get this law passed," says Alex Munton, a research analyst for Wood Mackenzie, a global energy consultancy based in Edinburgh. "Big oil companies are looking firstly for legal security before they consider venturing into Iraq--even leaving aside the violence."

Iraqi officials estimate it will cost about $20 billion and take five years to repair and modernize the industry, whose infrastructure had been rotting for decades because of international sanctions and Saddam's mismanagement. Insurgents have been attacking oil pipelines since 2003. A key northern line that leads to the export terminal in Ceyhan, Turkey, has lain idle for months since it was blown up. The industry also faces skills shortages. Years of suicide attacks and kidnappings have drained the country of its oil engineers, who have fled.

Still, Iraq has 115 billion bbl. of proven reserves and produces nearly 2 million bbl. daily, mainly from the Basra area in the south and Kirkuk and Kurdistan in the north. That's a sharp drop from about 2.8 million bbl. a day before the U.S. invasion in 2003 and an even steeper decline from a peak of about 3.7 million bbl. before the 1980 war with Iran. (From 100,000 to 300,000 bbl. a day are lost to smugglers.) The law would allow oil companies to explore hundreds of new oil fields under 10-year agreements and then 20-year production contracts in partnership with the government. Crucially, after paying a 12.5% royalty, foreign companies could export oil they find.

In drafting the law, officials had to tread carefully on explosive ethnic divisions. After decades in which Saddam barred Kurds from drilling in the resource-rich north, Kurdish officials suspected that the Shi'ite-dominated government in Baghdad would try to seize control of their resource. So the new law would let regional governments negotiate directly with foreign firms. Each contract would need approval from a new Baghdad-based Federal Oil and Gas Council, in which each ethnic group will be represented. The council has 60 days to challenge a contract and send its objections to arbitration. A separate revenue-sharing law aims to carve up billions of dollars in profits among each region--in proportion to its population.

By last February, that patchwork of compromises looked strong enough to win in parliament. Iraq's Cabinet approved the draft, and Oil Minister Hussein al-Shahristani promised U.S. officials that the law would be in place by the end of May. But months later, that confidence--and the deadline--has evaporated. Fierce arguments have raged over how much control Baghdad and the Iraq National Oil Co. should have over production. Oil workers' unions argue that the law gives Big Oil huge profits while potentially undercutting the interests of Iraqis. The major union staged a demonstration in July in Basra, calling for the law to be killed. Union leaders will convene a conference in Basra in early September to draft alternatives to privatizing the industry.

Exasperated by the delays, Kurdistan's powerful regional government--which had agreed to the law last February--simply passed its own legislation. It offers model contracts for oil firms, and the regional government's website has details of Kurdistan's oil blocks. Kurdistan has already signed five contracts and begun production.

The Kurds have greatly complicated al-Maliki's ability to pass national legislation and deepened a sense of crisis. "The government's credibility is at its lowest, and that makes things very, very difficult," says Tariq Shafiq, one of the authors of the bill and director of Petrolog & Associates, an oil consultancy in London. He believes the vote should be shelved until the violence subsides and the government is more stable. Many parliamentarians--most of whom spend months of the year outside war-torn Iraq--agree. Says Saleh al-Mutlaq, head of the National Dialogue Front party, which has 11 seats: "Even if it passes, companies will not have a good environment to work in. There will be strikes. There will be violence." His delegates intend to reject the law.

Yet, amazingly, oil companies are already engaged in a scramble for contracts, de****e lethal risks and widespread kidnappings of foreign contractors. While no company will begin real work before the law is passed, several have positioned themselves to start immediately after. Iraqi oil officials and Western execs are gathering at a conference in Dubai early this month to thrash out plans. Chevron and Total have signed a joint agreement to explore and develop Iraq's fourth-largest oil field, Majnoon, near the Iran border. In a similar arrangement, Royal Dutch Shell and the Australian company BHP Billiton are studying another big oil field, Halfaya, in Missan province. Shell is also considering developing vast untapped gas deposits, while China's National Petroleum Corp. has won an agreement to produce oil in the Ahdab field, also in the Shi'ite-dominated south.

Although experts like Shafiq advise against exploring while war rages, the temptations for oil companies to jump in are strong. Since contracts last decades, executives believe they might otherwise be left behind if and when the war ends. In recent months, the urge to get into the game has grown stronger. Back in April, the Colorado energy consultancy IHS estimated Iraq's oil reserves at about double the widely accepted figures--about 200 billion bbl., rather than 115 billion bbl. IHS's stunning finding would give Iraq huge clout in the global oil industry, making it second in reserves only to Saudi Arabia and ahead of Iran.

The hunger among executives and Western governments for a new oil law could backfire, however. As Iraqis see companies sign deals, they say they sense the law is being hurried to suit Western interests. "Politicians who sign it will be consigning their careers to the dustbin," says Kamil Mahdi, an Iraqi oil spe******t and senior lecturer in Middle East economics at Exeter University in Britain, who, like Shafiq, has argued that the law should be postponed until war wanes. But to government officials--facing a bankrupt Iraq entirely dependent on U.S. funds--that option seems untenable. "We cannot wait," says Thamir Ghadhban, Iraq's former Oil Minister, who is now the oil adviser to Prime Minister al-Maliki. "We need this." With potential windfalls of $70 billion a year, bloodshed and bombings might not be enough to hold back the oil stampede much longer.

Petro Showdown - TIME

Moment Of Truth in Iraq

Thursday, Sep. 06, 2007

It is a measure of how vaporous the ground truths in Iraq have become that George W. Bush had to sneak into the country he conquered. Extra security was needed to proclaim that Iraq was more secure, the surge was working and the country was worth more American blood and treasure. Before the surprise trip on Sept. 3, a TIME correspondent was summoned to a Starbucks in downtown Washington, where he was informed of the Iraq mission — and then prohibited from telling anyone other than his spouse and his boss. At dusk on Sunday, Sept. 2, passengers boarded Air Force One inside its massive hangar at Andrews Air Force Base. Once darkness fell, the hangar doors opened, and the plane pushed out onto the runway for takeoff, its lights off and its window shades drawn. Laptops were returned in midflight, but their owners had to disable the wireless functions to prevent the President's plane from being tracked across the globe. Twelve hours later, Air Force One touched down, and Bush stepped out onto the tarmac of another well-secured U.S. air base for an eight-hour visit to Anbar province.

Much of what happens in Iraq is bewildering and contradictory. A surge in U.S. troops has helped secure the capital — but seems to have pushed the violence elsewhere. Casualties among U.S. troops were down slightly in July and August but are surpassing last year's levels. An avalanche of new progress reports is interpreted by both proponents and opponents of U.S. policy as validation of their positions. Even the President's comments about troop levels can be confounding: Bush made the trip in part to pressure a reluctant Congress to permit his 30,000-troop surge, announced in January, to continue a while longer. And yet it was Bush who, during his brief visit to Anbar, hinted openly that troop withdrawals might begin soon. He told reporters that General David Petraeus informed him that "if the security situation continues to improve the way it has, we may be able to achieve the same objectives with fewer troops."

Americans sense intuitively that Iraq has a way of reducing what was once solid and certain into sand. Lawmakers from both parties expected September to be a month of reckoning for the President's Iraq policy — a stop-or-go moment when the U.S. would decide whether to continue the surge or begin an inevitable pullback. But even before Petraeus and Ambassador Ryan Crocker utter a word to Congress, that debate looks almost moot. Bush appears ready to continue the surge for another six months or so, and the Democrats lack the votes to check him. So what will unfold instead in Washington this month is not a debate about the surge but the beginning of a debate about what comes after: How long will the U.S. be in Iraq? (Probably a decade, possibly more.) How many troops will be needed? (Probably 130,000 to start, hopefully less.) What will the mission be after the surge? (Get in line — it's anyone's guess.) Will the Iraqis get their act together? (Not soon, as things stand now.)

Those puzzles are just for starters, their answers merely estimates. If you are following along at home, here are five other questions to keep in mind:

Did the surge work?
Yes and no. After Bush kicked a handful of other generals out or upstairs early this year, Petraeus changed tactics abruptly, threw a ring of fresh troops around most of Baghdad and crimped the flow of explosives into the city, making life there markedly better. The surge took place in a belt of outposts around the capital, where troops barricaded roads into the city, worked with local residents to flush out insurgents and spent millions creating safe zones where markets and normal life could return. Average Iraqis tell Time that Baghdad feels safer; sectarian violence in the capital has been reduced, Pentagon officials say, and many Baghdad residents want the surge to continue. That's in part what the operation's architects had in mind when they sketched it out last fall.

But from the beginning, the surge was as much a political strategy as a military campaign. U.S. commanders in Iraq repeatedly stressed that American troops were simply buying time for Prime Minister Nouri al-Maliki's government to do two things: buck up Iraqi security forces and take steps toward reconciliation that would, everyone hoped, lessen violence. The surge was designed to carve out a quiet space in which compromise rather than violence would rule. On this front, there is not much good news. Al-Maliki does not appear to need — or even want — to lead any hard negotiations. That's largely because the three major Shi'ite blocs in the Iraqi government are operating under what they feel is a historical mandate to undo centuries of injustice against them by Sunnis. In practice, this means giving the Sunnis no quarter in negotiations. "The Shi'ites feel they are carrying the burden of history and that they will betray their entire community if they agree to even one concession," says an Iraqi political analyst who asked not be be named. "This is not a matter of practical politics. It is a holy duty."

Why are we siding with the Sunnis now?
It is a little startling that the Sunnis, whom the U.S. tossed from power in 2003, are being showcased by Washington as its favorite new allies. Bush and Petraeus have trumpeted the fact that Sunni insurgents in western Iraq who were once allied with al-Qaeda against the U.S. have joined forces with the Americans against the terrorists. These new alliances were in part the result of luck. Al-Qaeda violently overplayed its hand and started randomly killing Sunnis who refused to ally themselves with the terrorist organization. And in some places, America won the Sunnis over the old-fashioned way: by paying them. The question is how widely the Anbar model can be applied elsewhere. It is easy to forget that Anbar is the one part of Iraq that is largely Sunni and thus doesn't suffer from the same kind of civil strife that upends order in other parts of the country. And if Anbar was truly secure and ready for a handover, Bush might be able to pull out the more than 20,000 Marines stationed in the province and send them elsewhere. In reality, no one thinks that is possible.

That's because there are unmistakable risks to the new Sunni alliance. Arming the Sunnis against al-Qaeda is fine, but if they tire of their alliance with Washington, they become just another faction armed with U.S. weapons. Shi'ites and Kurds worry that the Sunni tribesmen who are fighting alongside American troops now have little or no loyalty to the Iraqi government and would just as soon turn their guns on Iraqi forces as on al-Qaeda. In addition, strengthening a Sunni stronghold in the middle of the country goes a ways toward cementing the very partitioning of Iraq that the Bush team has long sought to avoid. Which means the U.S. has to reckon with its new Sunni allies on roughly the same terms that lobbyists calculate the tenuous support of Senators they don't really trust: the question isn't whether you can buy the Sunnis; it's whether they will stay bought. "These people used to be America's problem, so America has bought their friendship," says the Iraqi analyst. "When the Americans leave, these people will become Iraq's problem."

What happens now in Congress?
Less than many might expect. Democrats have been trying a variety of approaches since January: setting timetables, limiting deployments or easing troop-deployment schedules. De****e or maybe because of the consistent and vocal demands of the party's antiwar flank, none of the Democratic efforts have yet attracted lasting bipartisan support. The few that have come close fall well short of veto-proof margins. The best proposals, like the plan developed by Democratic Senators Carl Levin of Michigan and Jack Reed of Rhode Island that would begin withdrawals by 120 days after passage, mustered only 52 votes, not enough to overcome a filibuster or override a veto.

For now, Bush holds the high cards. Even if Democrats were able to peel off a dozen or more Republicans in the Senate and adopt a measure requiring a deployment on a specific timetable — and that's a big if — the vast majority of House Republicans are unlikely ever to break ranks and support such a plan. So Bush has little to fear from the Democrats, for all their promises to change course on the war. And there's a bonus in this for the President as well: if a close vote makes it to the floor of the Senate, Bush can allow most of the moderate Republican Senators who are up for re-election next year — Norm Coleman of Minnesota, John Sununu of New Hampshire and Gordon Smith of Oregon — to vote with the Democrats. That would permit endangered Republicans to strike an independent pose with voters and still enable Bush to sustain a veto in the House.

That doesn't mean the Democrats will stop trying. A faction of Democrats has sought to make some kind of vote on the Iraq war a regular occurrence, simply to force Republicans to go on the record as supporting Bush. It is likely that some of the votes that take place this fall will be as much about the future of Congress as about the future of Iraq. There are a dozen Republicans in both houses who are in very tight races next year. A vote for the status quo, Democrats believe, is priceless advertising fodder in the coming election.

Will troops start coming home?
Petraeus is likely to recommend that troop levels remain constant at around 160,000 soldiers and Marines until April 2008, when a gradual redeployment will begin. The drawdown process will seem agonizingly slow, and that's because it will be — one 3,500-strong brigade and its supporting personnel a month. The timing is strategic and political. Pentagon personnel predict a massive drop in recruiting and retention in April if troops overseas aren't given long-promised breaks to go home. The political clock is ticking too. A partial springtime withdrawal would permit the White House to signal six months before the 2008 election that it is bringing the war to an end.

But what a smaller U.S. troop presence can accomplish is less certain and much less discussed. Some lawmakers want the U.S. to pull out of Baghdad to Kuwait or Kurdistan. Others have called for the military to concentrate on training the Iraqi army — a project that has already cost the U.S. billions, to little effect. American soldiers complain that their nominal allies in the Iraqi police and army are more loyal to Shi'ite militias than to the national government. An American intelligence officer in a western Baghdad suburb reports that the Iraqi police there are so thoroughly infiltrated by insurgents that the entire force is useless. Bush has recently returned to the mantra that as the Iraqis stand up, the U.S. will stand down. But it is an open question whether — or for how long — the Iraqi army can survive after the U.S. leaves.

Whenever they begin, then, the withdrawals are unlikely to last very long. Many experts believe the threat of a wider civil war — and the regional instability that would follow — means that the U.S. cannot afford to reduce its presence in Iraq much below 130,000 troops for the next year and probably beyond that. And so it could turn out that just six months after the long-awaited drawdowns begin, they stop again. The remaining forces, Pentagon officials report, will give the Army some badly needed margin to rest and retrain its brigades, but only a little. Some officers at the Pentagon want deeper cuts — and want them sooner — believing that the surge will keep the Army stretched too thin for too long. Virginia Senator John Warner, who is as close to the admirals and generals as anyone on Capitol Hill, cast his lot with this faction when he called recently for a reduction of 5,000 troops this year. Such a move would be more symbolic than real, changing little on the ground. And it would still leave a key question unanswered: What U.S. strategy could avert the wider bloodshed that looks inevitable in the wake of a smaller force? One small advantage of extending the surge is that it postpones having to find an answer to that question.

Are the Iraqis to blame?
Everyone is to blame. The U.S. marched blindly into Iraq, dreaming of Arab democracy, only to create a sinkhole of regional instability. In a pair of epic fiascos, Donald Rumsfeld, Defense Secretary at the time, okayed an invasion force that was probably too small by half — and then agreed with U.S. envoy L. Paul Bremer to cashier the entire Iraqi army two months later. But it's also true that for four years, the Iraqi government has had literally more money than it could spend and yet has produced little to show for it. Basic supplies — oil, electricity, water — are chronically short. Inflation and unemployment are rampant.

Nor are the political prospects in Iraq encouraging. Washington has blown hot and cold this summer about the wisdom of sticking with what the Government Accountability Office called the "dysfunctional" al-Maliki's government. The current wind is marginally positive, but it was hard to miss the way Bush summoned the entire Iraqi A-team to Anbar during his surprise visit to press them to move faster. Iraqis tell Time, however, that it doesn't really matter if al-Maliki stays or leaves. As long as the current cast of dubious and discredited characters continues to dominate Iraqi politics, reconciliation is not going to happen. None of the likely replacements have shown particular inclination, much less ability, to rise above petty politics. "Some days, I think our problems are so big that we need a parliament full of Nelson Mandelas to solve our problems," says Iyad Jamaluddin, a legislator in former Prime Minister Iyad Allawi's multiethnic Iraqi National List bloc. "But the truth is, we don't even have one."

Blame has its uses, no matter how much there is to go around. In recent days, some Republicans have begun to argue that the U.S. did everything it promised militarily in Iraq and that the Iraqis and their government are the ones dropping the ball. It's an appealing story line designed primarily to help Republicans deflect the heat for a mission that did not turn out as planned. That has always been an advantage of the surge, after all: when it was unveiled last winter, it was difficult to tell if the new tactic was really a blueprint for the final victory or just a holding action to signal to Americans that the U.S. had done its damnedest before quietly pulling the plug on the enterprise. Bush isn't yet ready to blame anyone else. Instead, he has been waiting for months for this showdown with his war critics and now intends to prevail. He told journalist Robert Draper, author of the new book Dead Certain, that he was counting on Congress to continue a sustained military presence in Iraq through this year and into the presidency of whoever succeeds him. As early as May, Bush told Draper that the moment of truth would come in the fall. And now it has arrived.

Moment Of Truth in Iraq - TIME

Kurdistan’s Gushing Crude Spawns Conflict

A political battle brews over control of the north's substantial oil reserves.

By IWPR reporters in Kurdistan (ICR No. 232, 07-Sep-07)


The German seismologist working in northern Iraq was not supposed to talk about his job. But after having spent nearly three months in an isolated camp near the Taq Taq oilfields, he could not contain himself.

"You can dig where you want," he said. "The crude gushes!"

For more than two years, foreign companies have been hunting – and finding – oil in the semi-autonomous Kurdish region. They may not have discovered giant fields like the famous "Baba Gurgur" near Kirkuk, but the oil companies and their Kurdish clients are very pleased.

Iraq has 115 billion barrels of proven oil reserves, but its actual oil wealth is believed to be significantly higher. Iraqi Kurdistan and the oil-rich region of Kirkuk are prime territories for speculators because of their large proven and potential reserves.

The three northern provinces of Iraqi Kurdistan are also the safest region in Iraq, an additional draw for drillers and investors. The Kurdistan Regional Government, KRG, has pushed ahead with exploration in the north by signing contracts for oil exploration with foreign companies.

That has irked oil officials in central government in Baghdad, however, and the KRG’s windfall is far from secure. It is threatened by uncertainty surrounding a new national law on Iraq’s oil reserves; by Turkish concerns over Kurdish strength; and by pressure from rival ethnic groups whose territories are not so blessed with natural resources.

In early 2006, the first foreign oil company began producing new oil out of Kurdistan. The Norwegian wildcatter Det Norske Oljeselskap or DNO sealed two production-sharing agreements with the regional government in 2004, gaining a 55 per cent stake in both licenses. DNO will take 10 to 30 per cent of the profits; the rest will go to the region.

At first, DNO estimated that the Tawke field near the city of Dohuk held 100 million barrels and would reach peak production of 50,000 barrels a day next year. Now, it appears that the field may contain much more.

DNO's most recent operation in Tawke has a flow rate of 12,000 barrels a day, 40 per cent more than another well in the same area. DNO has 80 trucks moving as much as 10,000 barrels a day from the site. The flow rate may reach 20,000 to 25,000 barrels per day, but transporting this amount of crude by road could be logistically difficult and expensive.

A second lot of drilling began in May 2006 in the Taq Taq region, south of Sulaimaniyah, and was led by Taq Taq Operating Company, also known as TTopco, and Addax Petroleum, a Swiss-Canadian company. TTopco, a joint venture with Genel Enerji of Turkey, is currently drilling its fourth oil well and hopes to drill two more by end of 2007.

The three oil wells that TTopco has already drilled are expected to produce 75,000 barrels a day, said Kemal Afaraci, an official with TTopco. Oil reserves in Taq Taq are estimated at 1.2 billion barrels. Firms such as Canada's Western Oil Sands and Heritage Oil Corp as well as the UK's Sterling Energy are also exploring the region.

Kurdistan wants to produce 200,000 barrels a day of oil by the end of next year, and increase that to one million barrels per day within five years.

Although northern Iraq's oil reserves are not as large as the giant southern fields round Basra, the local natural resources minister, Ashti Hawrami, has said the area has "good potential", estimating reserves around 25 billion barrels of oil and 100 trillion cubic feet of natural gas.

He also held out the prospect of a second export pipeline from Kirkuk to the Turkish port of Ceyhan, which would run through Kurdish-controlled territory, thus giving it greater protection from the sabotage attacks that plague pipelines elsewhere in the country.

Kirkuk alone has ten billion proven barrels, and Hawrami has estimated that 20 billion barrels are lying in other disputed areas in the north. Based on these estimates, if the Kurds control the north - including parts of Nineweh province, where the KRG already has a strong political and security presence - their potential reserves would be about 55 billion barrels, or almost half of Iraq's known oil reserves.

That would mean Iraq's Kurds would have more oil than Nigeria, Africa's biggest oil producer.

Not everyone is thrilled by this prospect.

A referendum will decide whether Kirkuk and other disputed areas should be governed by the KRG or the central government. But political disputes between Kurdish and Arab leaders over when to hold the poll could delay the vote until 2008 or later.

Turkey, too, is opposed to Iraqi Kurds gaining Kirkuk because it fears that a too-strong Kurdish region might encourage its own Kurdish citizens to demand political rights. Angering Turkey could weaken a pillar of the Kurds' oil strategy by denying the landlocked region an outlet for exports.

"Iraqi Kurds would have nothing if they cannot export their oil," said Soner Cagaptay, director of the Turkish Research Program at the Washington Institute for Near East Policy.

And there is a bigger obstacle which concerns all of Kurdistan's oil exploration - a new oil law that should determine who controls the oil fields and how the revenues are shared. The Kurds are insisting that regional authorities such as the KRG have the right to manage oil projects and draw up contracts, which has been a point of contention with some Iraqi officials.

In early July, Prime Minister Nuri al-Maliki said his cabinet had approved the oil bill and was sending it to the legislature. At a news conference, Maliki described it as the most important piece of legislation in Iraq.

But only days later, de****e assurances from Maliki that the bill would soon be debated in parliament, Kurdish leaders, all Sunni factions and the 30 MPs allied to radical Shia cleric Muqtada al-Sadr spoke out against it. Although Kurdish leaders serve in Maliki's cabinet, the KRG said it had not even seen the latest draft and did not support it.

"We hope that the cabinet is not approving a text with which the KRG disagrees, because this would violate the constitutional rights of the Kurdistan region," said the KRG statement.

The key issue for the Kurds concerns the control and management of so-called future oil fields. Although Article 108 of the Iraqi constitution says that "oil and gas are the property of all the people of Iraq" and are to be managed by the federal government in conjunction with regional governorates, only current oil fields, which are controlled by the central government, are mentioned, not those that might be discovered in the future. Many arguments over the law are related to the 2005 constitution, which was written in vague terms in order to garner broad support.

The KRG has made it clear that it wants to negotiate its own contracts and opposes annexes contained in the present bill that give control of 93 per cent of the oilfields to a new state-owned entity, the Iraq National Oil Company, which will be created if the law is passed.

The controversial oil bill is now on hold because parliament recessed for August.

KRG natural resources minister Hawrami has maintained over the past several months that the Kurdish administration would move ahead with its own oil law and would not wait for Baghdad to pass national legislation. The Kurdish regional parliament did just that in early August, when it passed its own law to regulate oil management in the northern region.

KRG premier Nechirvan Barzani said in a statement that the passage of this legislation was "a historic moment that will be remembered for years to come".

The law creates a regional oil company to operate the fields in Iraqi Kurdistan and insists that the KRG should have a joint role, with the Iraq National Oil Company, in managing current oil fields in the Kurdish provinces. It demanded that the Iraqi central government doe not authorise operations in disputed areas such as Kirkuk until the referendum decides who is to govern them.

The Iraqi constitution calls for the country's oil revenues to be distributed equally, and the KRG law says that oil revenues will be sent to the central government. But it gives more regional control than some Iraqi officials would like local governments to have.

In a statement following the KRG's approval of its regional oil law, the Association of Muslim Scholars in Iraq, a leading Sunni Arab group, said in a statement that Kurdish politicians "are not the official representatives of the Iraqis or the Kurds". The association also warned foreign companies not to work with the "so-called Kurdish government".

Most Sunni Arab-dominated regions in Iraq are not believed to have oil, and Sunni leaders support strong federal control over oil revenue and management.

The Kurds believe differently. In a statement, Hawrami noted that "under the constitution of Iraq, oil and gas management is primarily a regional right, and our success depends upon us exercising that right. This law of the Kurdistan Region is the embodiment of that right".

There are also problems between the central government and the Kurdish authorities over current contracts. In March 2007, Iraqi oil minister Husayn al-Shahristani indicated that the agreement with DNO may not be valid because it has not been approved by the central government.

"All the contracts that have been signed either by the previous regime or by the northern region will have to satisfy the conditions of the new law," Shahristani said at an OPEC meeting in Vienna.

In May, Shahristani said at a conference in Saudi Arabia that any contracts signed by the Kurds before the federal oil law was passed would be considered invalid and illegal, reported news agencies.

Barzani insisted the contracts were legal, and issued a statement suggesting that his government may secede if the contracts were rejected.

"If Baghdad ministers refuse to abide by that constitution, the people of Kurdistan reserve the right to reconsider our choice," he said.

Other points of contention for Sunni and Shia leaders include how oil profits are distributed and foreign involvement in Iraqi oil policies and contracts. The Iraqi oil bill is vague on these issues.

But time is short. The White House is increasingly desperate for signs of political progress before the United States military commander in Iraq, General David Petraeus, and Ambassador Ryan Crocker report to Washington next week on the progress made since more US troops were sent in February. If there is little improvement by then, Congress and the American public will likely put pressure on the Bush administration to pull the 162,000 US troops out of Iraq.

The problems of the oil bill bode ill for the other “benchmarks” that the Bush administration has been pressuring Maliki's government to meet. These include provincial elections, reversing a decision by the US-led Coalition Provisional Authority to ban former Baath party members from holding government and military positions, and revising Iraq's constitution. But Iraqi lawmakers show little signs of bending to accommodate Bush on an issue as crucial as oil.

"We have two clocks - the Baghdad clock and the Washington clock - and this is a perfect example," said Mahmoud Othman, a prominent moderate Kurdish MP in Baghdad. "This has always been the case. Washington has been pushing the Iraqis to do things to fit its agenda."

Kurdistan’s Gushing Crude Spawns Conflict

* Oil Law * Outlawing Unions * Iraq Benchmarks

September 6, 2007

* Oil Law * Outlawing Unions * Iraq Benchmarks -- Institute for Public Accuracy (IPA)

Iraq says Syria has dropped plans to demand visas

Syria has dropped plans to impose visa restrictions on Iraqis who are entering the country to escape the daily violence, the Iraqi prime minister's office said Friday.

"The dialogues held between the prime minister's office and the Syrian brothers led to this decision to exempt Iraqis from getting a visa to enter Syria," Prime Minister Nuri al-Maliki's office said.

On Monday, Syria said it would impose visa restrictions on Iraqis from September 10 in a bid to control the flood of refugees into the country from its war-torn neighbour.

It was also planning to permit only those Iraqis who were from the economic, commercial and scientific sectors to enter Syria.
Since the US-led invasion of March 2003, more than 2.3 million Iraqis have become refugees, with upwards of 1.5 million now in Syria and as many as 750,000 in Jordan.

The United Nations High Commissioner for Refugees estimates that the number of Iraqi refugees in Syria is rising by 30,000 a month.
In accordance with its Arab nationalist ideology, the Syria government does not normally impose visa requirements on the citizens of other Arab states.

Iraq says Syria has dropped plans to demand visas - Yahoo! News UK


Syria denies dropping Iraqi visa plan

A Syrian official denied on Friday that Damascus had dropped plans to impose visa restrictions on Iraqis wanting to enter the country, as stated by the Iraqi prime minister's office.

"I deny the reports coming from the office of Iraqi Prime Minister Nuri al-Maliki relating to the cancellation of entry visas being imposed on Iraqis coming to Syria," the foreign ministry official told AFP.

Some 30,000 Iraqis fleeing violence in their own country are arriving each month in neighbouring Syria, according to the United Nations High Commissioner for Refugees.

Last Monday, Syria said it would impose visa restrictions on Iraqis from September 10 in a bid to control the flood of refugees. It was also planning to permit only those Iraqis who were from the economic, commercial and scientific sectors to enter Syria.

Earlier on Friday, Maliki's office in Baghdad claimed the visa requirement was being scrapped.

"The dialogues held between the prime minister's office and the Syrian brothers led to this decision to exempt Iraqis from getting a visa to enter Syria," the office said.

Since the US-led invasion of March 2003, more than 2.3 million Iraqis have become refugees, with upwards of 1.5 million now in Syria and as many as 750,000 in Jordan.

In accordance with its Arab nationalist ideology, the Syria government does not normally impose visa requirements on the citizens of other Arab states.

Syria denies dropping Iraqi visa plan | Iraq Updates


Does the left hand know what the right hand is doing?

Higher demand for dollar in Central Bank's daily auction

Demand for the dollar was higher in the Iraqi Central Bank’s auction on Thursday, reaching $103.050 million compared with $70.450 million on Wednesday.

In its daily statement the bank said it had covered all bids, including $24.160 million in cash and $78.890 in foreign transfers, at an exchange rate of 1,237 dinars per dollar, unchanged for the third session running.

The 18 banks that participated in Thursday's session offered to sell $15 million, which the bank bought at an exchange rate of 1,235 dinars per dollar.

Ali al-Yasseri, a trader, told the independent news agency Voices of Iraq (VOI) that the hike in the demand for the dollar was due to the increase in the cash bids and the bids in foreign transfers because of the stable exchange rate for the third session in a row.

The Iraqi Central Bank runs a daily auction from Sunday to Thursday.

Higher demand for dollar in Central Bank's daily auction | Iraq Updates

KRG publishes approved Kurdistan Region Oil and Gas Law in Arabic and English, updated model contract
The Spokesman
Kurdistan Regional Government

The Kurdistan Regional Government (KRG) is pleased to publish the Kurdistan Region Oil and Gas Law in Arabic and English, which has now been approved by the Kurdistan National Assembly (parliament). The parliament approved the Law on 6 August, and the Law entered into force upon the assent of President Masoud Barzani on 9 August.

The first draft of this Law was published in August 2006, and has benefited from extensive comments from petroleum companies, NGOs, and citizens of the Kurdistan Region and other parts of Iraq. It was approved by the Kurdistan Region Council of Ministers in July.

The KRG is also pleased to publish an updated Kurdistan Region Model Production Sharing Contract (PSC), amended to take the new Law into account.

The Arabic version of the Law is the official version. The Law will also be published in the Kurdish language in the near future.

KRG publishes approved Kurdistan Region Oil and Gas Law in Arabic and English, updated model contract | Iraq Updates

OIL AND GAS LAW OF THE KURDISTAN REGION - IRAQ

Link below

http://www.krg.org/uploads/documents/Kurdistan%20Oil%20and%20Gas%20Law%20English__2007_ 09_06_h14m0s42.pdf

Turkey eyes Iraq gas fields

Saltuk Duzyol, general manager of Turkey's pipeline company Botas, said his firm plans to develop gas fields in northern Iraq to strengthen supplies for the Nabucco pipeline project, reported Reuters.
He said more opportunities will be available in Iraq as soon as its government passes a new petroleum law to regulate its reserves.

Turkey eyes Iraq gas fields | Iraq Updates

Tensions hinder Iraq oilfield development

Major disagreements in the Iraqi parliament have to be negotiated before a critical and long awaited hydrocarbon law can be passed, Iraqi officials said at a summit in Dubai last week. This will ease the way for billions of dollars in foreign investment to enter the country's massive oil sector.

A draft oil law approved in July needs to undergo extensive amendments before it is finally passed. At the summit Abdul-Hadi Al Hasani, deputy head of Iraq's parliamentary energy committee, said the new rule would be passed by the end of the year. However, intense political squabbling can be expected before the bill is finalised.

The hydrocarbon industry accounts for over 90% of government revenue and its development is crucial to Iraq's future. "Iraqi people have suffered enough," said former oil minister Ibrahim Bahr Al Olom at the conference. "They deserve better life, better standards of living. The only window for such life is the development of Iraq's oil and gas sector."

Top ministers from the Iraqi government gathered for the Iraq Oil, Gas, Petrochemical and Electricity (IOGPE) summit held in Dubai last week. International public and private sector oil companies flocked to the three-day conference hoping to secure lucrative deals in the war-torn country.

However, it has not yet been decided which oilfields will be run by a new national oil company, or how contract models for investors developing the remaining run-down infrastructure will be formulated. These are likely to be hotly contested issues.

Iraq has the world's third largest proven petroleum reserves and some of the lowest extraction costs. Yet only a fraction of its known fields are in development, and Iraq is one of the least explored countries among the major oil producers. According to the Iraq Oil Commission only 155 exploration wells have been drilled. In addition, the country sits on 3.1 trillion cubic metres of proven gas reserves.

The development of Iraq's oil sector remains controversial among those who believe that the March 2003 US-led invasion of the country was in part driven by energy security concerns in the US and a desire to secure energy supplies in the country. The event drew over 500 attendees from around the world, proving that interest in Iraq's oil and gas sector is substantial.

Tensions hinder Iraq oilfield development | Iraq Updates