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By Shwan Zulal:
The Iraqi Cabinet has finally approved the draft Hydrocarbon Law and it will soon be read in Parliament. This latest development comes against the backdrop of another draft oil law, which was introduced by the Iraqi parliamentary committee for energy, pushed by the Iraqiya List and the Kurds.
Incumbent MPs walked out of parliament when the draft was supposed to have its first reading, accusing the energy committee of not consulting with the government and calling the draft law weak and insubstantial. The first Hydrocarbon Bill surfaced in 2007 and, due to political differences between the competing interests of the political factions and disputes over the legality of the Kurdish contracts, it has been delayed since.
The parliamentary committee has always been calling for the enactment of a hydrocarbon law before holding any further hydrocarbon auctioning rounds. However, the Government has not made it its priority to push for the law and concentrated on developing the oil and gas sector, with little progress. Commentators believe the law might be passed before the January auction. And the Iraqi government is adamant that the 4th round of auction should go ahead, regardless of the enactment of the law.
This legal conundrum has created a tremendous amount of uncertainty for the Kurdish Region and the oil and gas companies operating there. Moreover, other companies operating in the south of the country feel vulnerable too since the Iraqi government does not yet appear to be consistent because some contracts has been renegotiated after nearly two years and deals with Shell and Mitsubishi in the south of the country have been delayed.
The enactment of the oil and gas law – either draft- may give some investors a sense of security and encourage others to come to the country, but unless the law is reached by political consensus and the parties involved willingly agree to adhere to it, the status quo will not change.
The Kurdistan Region has been at the forefront of the parliamentary melee for the hydrocarbon law and, along with the Iraqiya list, it has managed to push Al-Maliki’s government to speed up the introduction of a government version of this law. The main aim of the KRG is to make sure that the contracts they enter into stay in place and that, if they are revised, KRG officials will have a say.
Information coming out of the Wikileaks files suggests that the US State Department has advised companies against investing in Kurdistan and especially in the oil sector due to the legality of the contracts. However, some companies have ignored the advice and could not resist what was on offer in Kurdistan. Hunt Oil being one example: they bought into the Dhok block despite such warnings. Furthermore, more talk of potential takeovers is emerging in Kurdistan as Tony Hayward’s investment vehicle Vallares is said to be in the final stages of making an offer for Turkish Genel Energy and there are rumours of British-listed GKP (Gulf Keystone Petroleum) being up for sale, although this is denied by the company. These activities can only be an indicator that interest in the region is on the up and investors are cottoning on to the fact that the KRG would not budge to Baghdad. It is also becoming apparent that the KRG will make sure the PSCs it has awarded are honoured because failing to do so would make the KRG irrelevant.
With the issue of the Kurdish oil contracts becoming the focus of Iraqi lawmakers while the Kurdistan Region has been shelled and bombed by both Iran and Turkey, the Iraqi government has acted with impunity and so far failed to defend its “citizens” in the north of the country. The Iraqi government’s lack of response can only confirm that Baghdad has very little to do with the Kurdistan Region and the impasse between Baghdad and Erbil is ever greater. In recent weeks the KRG has looked weaker and it appeared to be losing authority, but Kurdish politicians including the President have now come out fighting and condemned the attacks. The message has been clear to everyone: that the Kurdistan Region is here to stay and threatening behaviour from neighbouring countries will not dent her resolve.
This article first appeared on Kurdish Views
