Iraq minister firm: Oil deals with KRG illegal; Exports barred

Eric Watkins
Senior Correspondent

LOS ANGELES, Nov. 28 -- Iraqi Oil Minister Husayn Al Shahristani has defended his country's efforts to prevent international oil companies from signing exploration and production contracts with the Kurdish Regional Government.

In an interview televised via Dubai's Al-Arabiyah satellite channel, Al Shahristani said current Iraqi law does not allow any governorate or ministry other than the oil ministry to conclude oil contracts until the new oil and gas law is enacted.

When the law is enacted, he said, a Federal Oil and Gas Council [FOGC] will be established, and it will be the authority to which oil contracts are submitted for approval.

Until then, he said, the constitution is clear: "Iraqi oil is for Iraq. "The only side that represents all Iraq is the federal government, and it is not permissible for any part of Iraqi oil to be extracted and taken by whatever quarter without the Iraqi government's agreement."

No arm-twisting
Al Shahristani denied that any intimidation was behind Baghdad's decision to exclude companies that have concluded agreements with the KRG from signing contracts in other areas of Iraq. "It is not a policy of arm-twisting," he said, "It is a purely legal position."

He said dealings with the KRG and companies have not shifted from diplomacy to threats to dissuade them from concluding contracts: "I do not call what is happening a threat to anyone. All I said is that they should consider—and we are advising those companies—that when they violate Iraqi laws that are in force, they must bear the consequences."

Asked about his statement that foreign companies that produce oil on the basis of agreements concluded with the KRG will not be able to export the oil without the federal authorities' agreement, Al Shahristani said that is clear, and the companies know it.

He repeated that revenues from the export of Iraqi oil must be paid into a single federal fund and distributed among all Iraqis in their various areas according to the density of population.

Earlier this month, Al Shahristani said India's Reliance Industries Ltd. may find the going tough in acquiring future oil blocks in Iraq (OGJ Online, Nov. 20, 2007).

His remarks followed earlier reports that the KRG had signed five production-sharing contracts previously approved by its Regional Oil and Gas Council (OGJ Online, Nov. 13, 2007).

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