Iraq’s Petroleum Sector Following Establishment of New Unity Government

By Thomas W. Donovan, Managing Partner at Iraq Law Alliance, PLLC.

Introduction

On December 20 2010 a new unity government was announced, whereby former Prime Minister Nouri Al Maliki maintained his position and Iyad Allawi, who won the most seats in the March 2010 election, joined in a special power-sharing deal. Unsurprisingly, the upstream petroleum industry was one of the salient issues that contributed to the almost 10-month impasse in the formation of a new government. Despite the long hiatus with no functioning government (during which time Al Maliki did not relinquish his day-to-day duties), once the new government was formed, several systemic changes occurred in quick succession.

Replacement of oil minister

The most significant change in the new unity government relevant to the Iraqi petroleum sector was the removal of Hussain Al Sharistani, who was minister of oil from 2006 to 2010. Sharistani, a longtime industry insider who was the pivotal architect in the 2009 and 2010 petroleum bid rounds, now holds the arguably more powerful ministerial appointment of deputy prime minister for energy – a position which did not exist before the unity government was created. Industry analysts believe that this appointment was due both to the new power-sharing arrangement and to a move to create more of a working relationship between the fiercely territorial Ministries of Oil and Electricity. A better relationship between these two ministries is needed to reform the electricity sector following the Ministry of Electricity’s purchase of 56 fuel oil electricity turbines from General Electric and Siemens (the so-called ‘mega-deal’).

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