By Ahmed Rasheed Reuters - Thursday, April 26
BAGHDAD (Reuters) - Iraq's oil ministry said on Thursday foreign firms should sign oil contracts only with the central government until a new oil law is passed, adding that deals outside its jurisdiction would be considered illegal.
An oil industry source told Reuters the warning, made in an ministry statement after Oil Minister Hussain al-Shahristani met the Russian envoy to Baghdad, referred to contracts signed "recently" without the approval of the central government.
"The minister clarified that Iraq will not adhere to any contract signed outside the legal framework of the active laws, which confines negotiations and the signing of contracts in oil and gas fields to the oil ministry until the new hydrocarbon law is enforced," the statement said.
The new oil law, which Washington sees as a key step toward reconciling Iraq's warring communities, is vital to attracting investment from foreign firms to boost the Arab nation's oil output and rebuild its shattered economy.
"Foreign companies should only sign contracts through the central government and the oil ministry. The ministry warns companies who violate Iraqi law of the consequences of their actions and any contract that is signed outside the jurisdiction of the central Iraqi government is considered illegal," the statement added.
Iraq's Kurdistan regional government has signed several agreements with foreign companies, including a service contract last week with United Arab Emirate's Dana Gas.
Iraq's central government and Kurdish officials are currently trying to resolve disputes over the landmark draft oil law, which would determine control of the world's third-largest oil reserves.
Shares of Norway's DNO, an independent producer about to start drilling for oil at its Tawke field in the Kurdish-controlled north, fell as much as 4.5 percent after the oil ministry comments appeared to cast doubt on the company's production agreement with the Kurdish region.
An oil industry source told Reuters in Baghdad that the Iraqi government had no problem with a "Norwegian firm" that had signed a deal with the Kurds, without specifying DNO by name.
In Olso, DNO said it was confident about the validity of its oil production deal with Iraq's regional Kurdish authorities.
"We have always been confident in our agreement and we can't see that anything has changed," Chief Executive Helge Eide said.
By 1413 GMT the shares had pared their losses and were down 1.3 percent at 11.83 crowns.
DRAFT LAW
Iraq's Deputy Prime Minister Barham Salih, an architect of the draft oil law, told Reuters after the cabinet passed it in February that it would allow the Kurdish regional government to review existing contracts it has signed with foreign firms to ensure consistency with the terms of the new law.
Salih said a commission of independent experts would ratify consistency in case of contention and that regional authorities in Iraq would also be able to negotiate oil contracts with foreign companies based on the main criteria of "maximising revenues for Iraqi people."
Shahristani said last week the law would be ready for submission this week to parliament. But Kurdish energy officials have said annexes that would wrest oilfields from regional governments and place them under a new state-oil company are unconstitutional, raising the prospect of more delays.
The world's top oil companies have been manoeuvring for years to win a stake in Iraq's prized oilfields such as Bin Umar, Majnoon, Nassiriyah, West Qurna and Ratawi -- all located in the south of the country.
Officials from Iraq's central government and the Kurdistan region said they would meet this week in Baghdad to iron out disputes over the draft law.
A fair distribution of Iraq's oil wealth is vital for national reconciliation because Sunni Arabs, who live in central and western Iraq, fear a bad deal would cut them off from any windfall should security improve enough to substantially boost production. Sunni Arabs are the backbone of the insurgency.