The furore over the contract signed by US oil giant Exxon with Iraqi Kurdistan is another sign that Iraq urgently needs a new oil and gas law. As this primer from Niqash explains, the lack of this law could well be a sign that the dream of united Iraq is over.
Any opinions expressed are those of the author, and do not necessarily reflect the views of Iraq Business News.
It’s been years in the making and the latest row about Iraq’s much-debated, much-delayed and mired-in-controversy national oil and gas law only indicates once again that issues around the legislation should have been resolved by now. The resolution of issues around the oil and gas law, which has never been passed in parliament, is essential to not only Iraq’s future but also to the stability of the region and it is way overdue.
The International Energy Agency forecast that Iraq would be the single most important source of new oil production between now and 2035, making the development of the country’s energy industry critical to international oil markets.
The latest drama focuses on the tensions between the federal government in Baghdad and the semi-autonomous state of Iraqi Kurdistan. In mid-October American oil giant ExxonMobil signed a deal with the government of the semi-autonomous region of Iraqi Kurdistan, which is using a form of oil and gas law that they formulated themsleves and which has not been approved by Iraq’s federal authorities, who are still using an older version. The contract signed by Exxon, which has been described as a “landmark deal” authorizes the firm to develop oil and gas in six blocks in the northern region. In doing so, ExxonMobil became the first major oil company to sign such a deal.
This was a huge public relations coup for Iraqi Kurdistan and for the policy makers in its capital, Erbil. It is certain to have an effect when Iraqi Kurdistan starts negotiations with Baghdad again on oil policy and oil legislation. As the Financial Times wrote last week “conventional wisdom says that the interests of US “Big Oil” and Washington go hand-in-hand. Thus, many see ExxonMobil, the largest US oil company, as an extension of the US State Department”. And some analysts believe the deal must have been OK-ed by the US State Department in an attempt to undermine the current Iraqi government, led by Prime Minister Nouri al-Maliki, after acrimonious talks about the nature of the upcoming US troop withdrawal. It seemed very unlikely that Exxon could have acted without being given the green light by Washington.