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Government Pushes Forward with Discussions on Developing Oil and Gas Fields - International Law Office

International Law Office

Energy & Natural Resources - Iraq

Government Pushes Forward with Discussions on Developing Oil and Gas Fields

October 27 2008

Following the pre-qualification of 35 international oil companies (IOCs) by the Ministry of Oil’s Petroleum Contracts Licensing Directorate in April 2008, on October 13 2008 the minister of oil met IOCs in London to discuss opportunities in the Iraqi oil and gas industry. Prior to the meeting, the minister had stated in the press that IOCs would be invited to bid for licences to help develop certain fields under technical services agreements. The Ministry of Oil has also indicated that pre-qualified IOCs will be expected to establish representative offices in Iraq, pending the award of contracts which will allow them to establish branch offices.

However, reports emerging after the meeting in London indicate that the Ministry of Oil may have opted for agreements with IOCs, in which they can potentially own 49% in project companies established to service the licences that will be issued. Profit sharing will be determined by inviting competitive bids for the fields. A six-month bidding period has been opened and results regarding the first licences to be awarded are expected in June 2009.

The Ministry of Oil appears to be trying to strike a balance between production-sharing agreements, which it does not recognize as legal under existing petroleum legislation, and the ambitions of IOCs to play a bigger role in the Iraqi industry that goes beyond technical services contracts. The Kurdistan regional government has signed numerous production sharing agreements with IOCs over the past two years, none of which the Ministry of Oil recognizes as legal. The Ministry of Oil threatened to blacklist the companies participating in the Kurdish production sharing agreements and none of them appears to be among the list of 35 pre-qualified IOCs.

The minister of oil has also announced that a second prequalification phase will be opened in the near future, followed by a second licensing round. The announcements follow the visits of senior officials from several Arab nations, including Egypt, which procured assurances from the Iraqi prime minister that Egyptian companies would have a role to play in the Iraqi oil and gas industry. A number of Egyptian companies participated in the first pre-qualification round earlier this year, but none was successful.

Recent activity in the industry comes at a time when there is still no movement on Iraq's new oil and gas law, which has been stalled by political issues between the Kurdistan region and the federal government. Despite this hiatus, neither party is willing to wait until a new law is in place before moving forward with developing the country’s hydrocarbon resources.

For further information on this topic please contact Mohamed H el-Roubi at I&D Iraq Law Alliance by telephone (+964 790 191 9425) or by fax (+2023 760 4593) or by email (mohamed.elroubi@idilaw.com).

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