Eric Watkins
OGJ Oil Diplomacy Editor
LOS ANGELES, Feb. 11 -- Iraq’s Deputy Prime Minister Hussain Al-Shahristani, who oversees energy for the government, said Kurdistan's production-sharing contracts (PSCs) with international oil companies (IOCs) must be turned into service contracts in order to be approved by the central government.
“All the contracts we [central government] have signed were service contracts, and we expect that all these [Kurdish PSCs] should be amended to be service contracts in order to be approved,” Al-Shahristani said, contradicting earlier remarks by Prime Minister Nuri Al-Maliki.
Just a day earlier, in an interview with the AFP news agency, Al-Maliki appeared to signal an end to the long-running feud between Baghdad and the Kurdish Regional Government over the status of agreements signed with IOCs.
“The Oil Ministry accepted these contracts because the nature of the extraction in Kurdistan is different from Basra,” Al-Maliki told AFP. “There is a need for bigger efforts there, while in Basra it [oil] is closer to the surface. It’s difficult to have service contracts in Kurdistan, but it’s normal to have them in southern Iraq,” he added.
“In fact, this was a misunderstanding and misquoting by the AFP of what the prime minister said,” Al-Shahristani told the Reuters news agency in a later interview. “It did not actually represent the position of the prime minister and the Iraqi government towards this issue.”
AFP said it stood by its story, despite the comments by Al-Shahristani. “Mr. Maliki was not misquoted, and we stand by our story in full. In no part of our interview did Mr. Maliki suggest revising the Kurdish contracts into service agreements,” said AFP Baghdad Bureau Chief Sammy Ketz, who conducted the interview.
According to analyst IHS Global Insight, it is “virtually impossible” that AFP would have misquoted or misinterpreted Al-Maliki, given the rather extensive arguments he was giving as to why dual contract framework systems were justified.
The analyst suggested that Al-Maliki might have been trying to create facts on the ground, or at least send up a test balloon, by increasingly tying himself to a solution, which is likely to be along the lines of what he has negotiated with the Kurds.
“Having gone on record with these views,” the analyst concluded, “it will be harder and more politically expensive for others to undermine Al-Maliki.”
The feud between Baghdad and the KRG began in October 2009 when exports from two fields—Taq Taq and Tawke—started but were suddenly halted when the central government refused to pay oil companies operating the two fields, including Norway's DNO and Turkey's Genel Enerji.
The national parliament has yet to pass a key hydrocarbons law that would regulate the sector and divide responsibility between Baghdad and Iraq’s provinces. The law has been delayed for more than 3 years due to disagreements between legislators from the country's various communities.
Contact Eric Watkins at [email protected].
Rystad Energy.
