Federal Oil and Gas Law: Viability, Coherence and Functioning Perspectives

 C: The Bureau of Independent Advisors (BIAs)

1. FOGC deals with matters mostly of sovereign nature that has long-term implications for the petroleum midstream and upstream sub-sectors and the Iraqi economy at large. These matters should not be left in the hands of “one year” employed advisors.

2. The infringement on sovereignty would be highly probable if any of the BIAs is foreign national, and this possibility does exist in the version of February 2007.

3. The proposed law gives too much power and authority to BIA. Thus, they would in fact be the effective decisions makers within FOGC despite their temporary and short-term employment.

4. The temporary term of employment in comparison with the magnitude of their function and influence would make the advisors unnecessarily susceptive to corruption that could very well undermine and compromise the Iraqi national interests.

It could be more feasible to delete any article in the law regarding BIAs, and substitute the BIA by strengthening the technical capacities of the General Secretariat of FOGC as suggested above.

D: Decisions by FOGC

1. The law should ensure that decision taken by FOGC should not be subject to veto by any of its members, or by minority members and should not be taken by consensus, as this practically gives veto power to any member, and renders FOGC inactive;

2. The approval of FOGC should not be deemed given due to elapse of time.

3. Decisions pertaining to contract awarding through licensing process involving IOCs should not be final but subject to the approval of both the executive (CoM) and legislative (CoR) branches of government.

4. The law has to clearly demarcate the line of authorities and jurisdiction of this council to avoid conflict with and overlapping over the territory of other vital entities such as CoM and MoO.

5- The role of the Ministry of Oil- MoO

The MoO plays a pivotal monitoring, regulatory and policy role. MoO is responsible for monitoring petroleum operations to ensure adherence with the laws, regulations, field’ development plans and contracting terms. In addition to its administrative and technical duties, MoO carries out verification of costs and expenditures incurred by the holders of rights to ensure correct and justified cost recoveries for the purpose of determining revenues accruing to the government. The Ministry through inspection, auditing and other appropriate actions verifies conformity with legislation, regulations, contractual terms and internationally recognized practices. Performing such diverse tasks requires specialized professional, legal, technical, accounting, planning and even diplomatic expertise.

Decentralization is important, necessary and useful, but at the same time it must first be well planned and phased/implemented properly. Second, institutional and human resource capacity development must commence as soon as possible. Third, there must always be a central organ-MoO, which coordinates with and supervises those decentralized entities to preserve and guarantee the supreme national interest.

Therefore, the law should not weaken, marginalize or undermine the role and function of the Ministry. Moreover, the timing and coordination between this law and MoO law has to be maintained to avoid predetermination or pre-empts each other.

6- Matters related to INOC

The proposed law creates, wilfully or by negligence, ambiguous, contradictory and not reassuring situations for INOC with regards to oilfield allocation, types of contract, priorities and the treatment of the company on a competitive standing.

Provisions relating to INOC should be made very clear accompanied with full list of all fields (producing, under-development and discovered but not yet developed) and known exploration blocks earmarked for INOC.

And since the most prized oil and gads fields have already been contracted with IOCs, the remaining fields (developed, underdevelopment or discovered but not developed) should, as a rule, remain within and develop through national direct efforts and, as exception, develop through service contracts.

The parliament had, in July 2011, debated a draft law for INOC but that did not lead to finalization of an acceptable version. Therefore, the timing and coordination between this law and INOC law has to be maintained to avoid predetermination or pre-empts each other.

This implies there is and could be an organic linkage between the three laws: oil and gas law, the Ministry law and INOC law.