Iraq's Petroleum Sector Following Establishment of New Unity Government

The new minister of oil is Abdul Karim al-Luabi, who was appointed on December 21 2010. One of his first acts was to initiate a fourth round of petroleum bidding (the first and second bid rounds were solely for petroleum fields, while the third bid round was exclusively for natural gas). He has not announced what form of contract and model will be used for the petroleum bid round and has not indicated which individual fields will be involved. Industry insiders state that up to 12 fields, including the large Baghdad field in central Iraq, may be part of the fourth bid round. The minister has also publicly stated that production must increase on several petroleum blocks.

New court for foreign investment

A separate occurrence which coincided with the creation of the new unity government was the establishment of a new court for foreign investment. The new Foreign Commerce Court is a streamlined federal court under the Ministry of Justice which has specific jurisdiction to entertain disputes only where one of the litigants is a foreign party. The court's goal will be to create an impartial court where international parties do not feel as though the Iraqi party has a home field or domestic advantage. The foreign investment court will be run from Baghdad by a former Supreme Court justice. According to information provided by the court, the justices involved have received recent training abroad in international standards of business law and will be backed up by specialised legal staff. During the court's inauguration, it was stated that if the court is a success, a separate branch will be opened in Mosul.

Export of Kurdistan petroleum

On January 19 2011 another systemic change occurred in the disputed petroleum sector when the Kurdistan Region (as negotiated by the Kurdistan regional government, whose seat of power is in Erbil), following a deal with the federal Ministry of Oil led by the new minister, began re-exporting abroad petroleum which had been produced within its borders.

The ability for the Kurdistan regional government to export its petroleum and retain the remuneration fees for its own benefit and not that of the federal Iraqi government has been a long-debated and unsettled issue during Sharistani's tenure as minister of oil. In fact, Sharistani was publicly adamant that the Kurdistan regional government's exportation abroad was illegal under the 2005 Constitution. This exportation date was initially agreed on or around December 25 2010 - approximately four days after the new oil minister assumed his formal portfolio.

Comment

The most significant change to take place in the Iraqi energy sector could be the passage of the federal comprehensive Petroleum Law, which has been before the Council of Representatives since 2007. Its passage will be a legislative priority for the new minister of oil and, with the new unity government now in place, it is hoped that it will not be debated or deadlocked.

For further information on this topic please contact Thomas W Donovan at Iraq Law Alliance PLLC by telephone (+964 7 901 919 425), fax (+20 2 760 4593) or email (thomas.donovan@iqilaw.com).

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