I thought I would put together this simplified and short presentation as to why we need the Oil and Gas Law implemented prior to the reinstatement giving us investors the substantial revaluation we all have been waiting for.

Trust me Iraq is a long way off from giving a monthly, reoccurring oil stipend to the average citizen. As it is today they spend abut 2 billion just on government salaries resulting from a socialistic form or government left over from Saddam Hussein which they are desperately trying to get out of and transition to the private sector. With the private sector it can supply the salaries, pensions and other benefits to the people, alleviating this burden from the federal government, thus freeing up more oil revenue to invest in the infrastructure and military of Iraq. When this day comes, and it will, there is a chance then that excess oil revenues could be paid out to the citizens.

First of all, when I (and Iraq) talk about the Oil and Gas Law we are also talking about the Hydrogen Carbon Law or HCL, same thing just different terms used. For it to be implemented, we are talking about the provision within the legal framework of the new Iraqi constitution of October 2005 and enforceable beginning in 2006 that still has to be put into a more detailed set of provisions called a “referendum”. This is called for in ordr to fully implement their new constitution. The referendum will be the “enactment” of the constitution in more detailed practical terms. Once this is done and passed in parliament the Oil and Gas law will be completed. Finally….

Since the first session of the Iraqi Council of Representatives, in 2005, the draft oil and gas law has been locked away, as disagreements prevent its approval in its final form.

After 18 years, Iraq announced, in late last August 2023, the formation of a committee to develop “a draft of the oil and gas law and present it to the government and the House of Representatives”. I thought this was outstanding news, but it took an honest prime minister to push it, Al-Sudani. But why now are the finally pushing its implementation? Could it be they know that they need it for the U.S. to sign off on the reinstatement process of the Iraqi dinar? Note the following news articles.

2023: There is a real will now in the House of Representatives to legislate the law,” noting that “Iraq’s oil is one and indivisible, and there is a movement towards achieving justice in the distribution of wealth to the people, whether in the Kurdistan region, the center, or the south.” But why has this will changed? What is different this year? Could it be what I have been telling my bloggers to read for almost a decade now, that the law must be passed (at least in part) to complete the full implementation of the Iraqi constitution. This must be done to reinstate the currency of the country back to a global trading status. Unless the UN and the U.S. changes their stance on this issue, we will not see the substantial revaluation and then the reinstatement we are looking for.

Iraq exports an average of 3.3 million barrels of crude oil per day, and black gold constitutes more than 90 percent of the Iraqi treasury’s resources. So you can clearly see the importance of this law. Why would the U.S. and the IMF not want these lose issues to be settled once and for all?

It is now the year 2023. Yes, 17 years (almost 2 decades) since Iraq implemented their new constitution yet they still do not have a formal Oil and Gas law. Why is this?

2005 Iraqi Constitutional Provisions:

Article 108:

Oil and gas are the ownership of all the people of Iraq in all the regions and governorates.

Article 109:

First: The federal government with the producing governorates and regional governments shall undertake the management of oil and gas extracted from current fields provided that it distributes oil and gas revenues in a fair manner in proportion to the population distribution in all parts of the country with a set allotment for a set time for the damaged regions that were unjustly deprived by the former regime and the regions that were damaged later on, and in a way that assures balanced development in different areas of the country, and this will be regulated by law.

Second: The federal government with the producing regional and governorate governments shall together formulate the necessary strategic policies to develop the oil and gas wealth in a way that achieves the highest benefit to the Iraqi people using the most advanced techniques of the market principles and encourages investment.

(Antiquities and antiquity sites, traditional constructions, manuscripts and coins are considered part of the national wealth which are the responsibility of the federal authorities. They will be administered in cooperation with the regions and governorates, and this will be regulated by law.)

A draft oil and gas law has drawn criticism from Iraq’s Sunnis, who prefer a stronger role for the central government, and from Kurds, who prefer a stronger management role for the regional authorities. The majority Shiites have sought to mollify the Sunnis by keeping control of Iraq’s oil sector primarily in Baghdad, not the regional governorates.

On 15 February 2022, the Federal Supreme Court of Iraq (the “Iraqi Supreme Court”) issued a long-awaited and potentially fundamental decision relating to the ownership and control of oil and gas situated in Kurdistan, as well as the legality of the entire independent Kurdish oil and gas sector.

The Iraqi Supreme Court’s decision purports to resolve a long-standing legal and political dispute between the Federal Government of Iraq (“FGI”) on one hand and the Kurdistan Regional Government (“KRG”) on the other. While the decision focuses on the relationship between Federal Iraq and Kurdistan, a semi-autonomous region within Iraq, and the interpretation of the Constitution of the Republic of Iraq (the “Constitution”), it is likely to be very significant for all international oil and gas companies (“IOCs”) who have invested or are considering making investments in Kurdistan.

Could this recent court decision finally be the spark that will get the Oil and Gas law written successfully and passed in parliament?

Let’s continue….

Before the Constitution was enacted by a referendum on 15 October 2005, control of Iraq’s hydrocarbon industry was a settled question. The FGI was solely responsible for the development, management and sale of oil and gas throughout Iraq. However, after the Constitution, the FGI and the KRG began to adopt different interpretations of Articles 111 and 112.

The FGI’s position is that, read together, Articles 111 and 112 provide that the FGI is exclusively responsible for “managing” oil and gas “extracted” from “present fields” in Iraq on behalf of the people of Iraq, albeit it must do so “with the producing governorates and regional governments”, which includes the KRG (recognised explicitly in Article 117(1)). It is therefore the FGI, and only the FGI, which is empowered to determine Iraq’s strategic oil policy and to explore, develop, exploit and market oil and gas within Iraq and internationally, including managing any engagement with IOCs.

The KRG’s position ultimately rests on the meaning of “present fields” in Article 112(1). The KRG contends that “present fields” encompass only those which were producing oil and gas in October 2005 (the time of the enactment of the Constitution), and that the FGI is not therefore empowered to manage oil and gas in respect of any fields which were not producing at that time. The FGI’s response is that the term “present fields” in the context of Article 112(1) includes fields which were proven but not necessarily actively producing in October 2005.

The KRG also argues that the word “extracted” in Article 112(1) limits the FGI’s authority to management of oil and gas after extraction, and the FGI does not therefore enjoy the same powers prior to extraction, that is to say, during development and exploration. The FGI’s response is that Article 112(2) provides it with authority to dictate how all oil and gas development activities in Iraq should be undertaken, including exploration and development. The KRG’s counterargument is that the FGI only has authority to decide broad brush policies regarding oil and gas, with the KRG empowered to manage the detail in respect of fields within Kurdistan under Article 115, which gives the KRG residual authority to decide matters not exclusively allocated to the FGI under Article 110.

Adding to the constitutional ambiguity, there is no federal oil and gas legislation in Iraq, despite the Constitution requiring one. Although various draft laws have been proposed, including in 2007 and 2011, no federal law has ever been enacted. Instead, it was the KRG which passed Law No. 22 of 2007 (the “KRG Oil and Gas Law”), under which the KRG granted itself powers to enter into production sharing contracts (“PSCs”) with IOCs.

Notwithstanding the absence of a federal law, the FGI has consistently maintained that the KRG Oil and Gas Law, and all PSCs entered into by the KRG under it, are unconstitutional and invalid, and that the FGI’s State Oil Marketing Organization (“SOMO”) is the only entity entitled to market and authorize the export of petroleum produced anywhere in Iraq.

What led to the Iraqi Supreme Court’s decision?

Until 2013, the KRG exported most of its oil and gas by trucking crude oil across the border into Turkey or Iran to be sold locally or transported to various ports for sea shipment. In response, the FGI threatened to ‘blacklist’ any buyers of independent Kurdish crude by forbidding them from purchasing the FGI’s crude from SOMO or participating in upstream bid rounds conducted by the FGI. In addition, in August 2012, the FGI commenced proceedings against the KRG requesting a decision on the interpretation of the Constitution and the legality of the KRG Oil and Gas Law, a request which the Iraqi Supreme Court has finally addressed in its recent decision, nearly ten years later.

To add even more controversy over the Iraq oil….

Then, in November 2013, despite stern opposition from the FGI, the KRG built a pipeline spur linking three of its major producing petroleum fields to the Iraq-Turkey Pipeline (“ITP”). The KRG thereby expanded its ability to export crude directly to Turkey and onwards into international markets (typically bound for Europe, Asia or Israel after loading at the Turkish port of Ceyhan).

The oil saga continues…..

In response to the ITP pipeline spur, in May 2014, the FGI commenced an ICC arbitration against Turkey and the Turkish state pipeline operator, BOTAŞ, seeking orders to compel them to stop transporting, storing and loading Kurdish crude without the FGI’s consent, and to pay damages on the basis that Turkey’s actions violated the agreement governing use of the ITP. That arbitration is still pending resolution. Around the same time, the FGI sought an injunction from the Iraqi Supreme Court, which the Iraqi Supreme Court declined to give until it had ruled substantively on the legality of Kurdish exports, a ruling it had (until its decision in February 2022) been prevented from giving because the KRG has refused to attend any hearings. At the same time, SOMO wrote to several IOCs, trading houses, refining companies and other third parties advising them not to facilitate the export and sale of Kurdish crude without SOMO’s authorization against a veiled threat of blacklist.

Can you also now see why the Turkish army attacks into the oil fields of Kurdistan? We have read many articles on this topic. Yes, it is all connected with the lack of a proper Oil and Gas law, as specified by the constitution. The new media talks about the attacks and hypes up the infringement of Iraqi sovereignty but never really givens any details or explanation as to why Turkey would suddenly attack Kurdistan region of Iraq. You can also now see why the supreme court of Iraq had to make its ruling in order to finally get the Oil and Gas law passed to satisfy the constitutional requirement.

The question is this – Is Iraq truly now ready for this Oil and Gas referendum?

Just in February 14, 2023….

Parliamentary wealth: All roads are open to passing the oil law in parliament

A member of the Oil, Gas and Natural Resources Committee, Kazem Al-Tooki, revealed that there are parliamentary efforts to pass the oil and gas law soon, indicating that all roads are clear towards passing the law.

Al-Touki said in a statement to Al-Maalouma, that “the political situation that the country is going through is ready to accelerate the oil and gas law and all controversial laws.”

He added that the legislation of the law will serve the oil-producing provinces,” noting that the legislation of the law is among the priorities of the government program and the political agreement within the State Administration Coalition.” 

Stressing that the legislation of the law during the current session will be a radical solution to the dispute over oil wealth, and added that there are efforts to pass the law in the dome of Parliament.

The Al-Fatah Parliamentary bloc had suggested, earlier, that the oil and gas law be approved during the current session due to the presence of the political will of all forces, including the Kurdish forces, stressing that the recent meeting of the state administration forces seriously discussed the issue in order to approve it in the current session.

So, we can obviously see we are not just talking about just some “HCL” law and giving handouts to the citizens on debit cards as a means to trigger the RV, as many of the intel gurus allude to. As we can read today, there is much, much more to the oil and gas law. The oil and gas law also goes hand in hand with Article 140 also of the new Iraqi constitution which governs the disputed lands between the border of Iraq and Kuwait. These lands are also rich in oil. So, whenever we read about any progress towards the oil and gas law from Iraq they are referring mostly to Article 112 but it is usual also to consider the Article 140 ramifications.

PASSING THE CONSTITUTIONAL REQUIREMENT FOR THE OIL AND GAS LAW (referendum)

The first part we already talked about in that the Oil and Gas law and how this is a constitutional requirement by Article 112. But much more than that. The reason for having it in the constitution in the first place is that, as we read in the news the following and I quote from the article:

The political analyst Sabah Al-Ugaili considered that:

1.approving the oil and gas law will be Iraq’s safety valve in the next stage, while stressing that

2.passing the law will work to end all crises that occur regarding the export of Kurdistan’s oil.

Al-Aqili said in an interview with the information agency:

3.”The approval of the law will redraw the road map for the distribution of wealth among all components.

Legal and regulatory framework Constitutional framework

The basic legal framework for the oil and gas sector in the Republic of Iraq is set forth in the Constitution of Iraq, which was approved by the Iraqi people by referendum on 15 October 2005 and entered into force in 2006. The relevant provisions of the Constitution provide as follows.

Article 111

Oil and gas are owned by all the people of Iraq in all the regions and governorates.

Article 112

First: the federal government, with the producing governorates and regional governments, shall undertake the management of oil and gas extracted from present fields, provided that it distributes its revenues in a fair manner in proportion to the population distribution in all parts of the country, specifying an allotment for a specified period for the damaged regions that were unjustly deprived of them by the former regime, and the regions that were damaged afterwards in a way that ensures balanced development in different areas of the country, and this shall be regulated by a law.

Second: the federal government, with the producing regional and governorate governments, shall together formulate the necessary strategic policies to develop the oil and gas wealth in a way that achieves the highest benefit to the Iraqi people using the most advanced techniques of the market principles and encouraging investment.ii Draft oil and gas law

As referenced above, Article 112 of the Constitution of Iraq requires the enactment of a law to regulate the oil and gas sector. To date, however, no such law has been enacted.

In February 2007, an initial draft oil and gas law was approved by the Council of Ministers and later revised in April of 2007. Because of differences over the terms of the draft law, the 2007 draft law was never enacted.

A revised draft of the oil and gas law was presented to the Council of Ministers in 2011. Among its salient points are the following:

1.the establishment of a Federal Oil and Gas Council (FOGC), which would act as the main body for overseeing the Iraqi petroleum sector.

2.the delegation with a specific set of responsibilities to the FOGC (see Iraqi constitution for further info on these responsibilities)

3.the establishment of the Iraq National Oil Company. (The Iraq National Oil Company (INOC) was founded in 1966 by the Iraqi government. It was empowered to operate all aspects of the oil industry in Iraq except for refining which was already being run by the Oil Refineries Administration (1952) and local distribution which was also already under government control.)

4.provision for the relevant authority in the Kurdistan region (or any other region that may be established pursuant to the Iraqi Constitution subsequent to the enactment of the oil and gas law) to participate in petroleum-related matters. (Please reference the Iraqi Constitution for more details on how they should participate). (So, who actually owns all the oil? Is it Kurdistan or the GOI? The answer is simple as it is the people of the nation of Iraq and that consists of Kurdistan and the other half of Iraq – yes, one united country.)

5.provision for the entry of exploration, development and production contracts with private companies (both Iraqi and foreign), including principles for the granting of such contracts, and topics to be included in all such contracts. (Please reference the Iraqi Constitution for more details on how they should participate). (We have seen many articles of granting companies licenses to come into Iraq for this purpose.)

6.a clear right for license holders to transfer profits outside of Iraq (after payment of relevant taxes).

7.a requirement that petroleum revenues be ‘distributed fairly among the people’, as regulated by a separate law. (This is the provision that most of these intel gurus talk about when they talk about HCL. So we can see that the oil and gas law is much, much more than the distibution of petroleum revenues to the people. But have we seen this yet?)

8.establishment of a future fund in which a percentage of petroleum revenues will be deposited to ensure the rights of future generations. (This is the special fund we are hearing about in the Iraqi news that they are pushing to establish. It is being called the “sovereign fund”)

In an article on Iraqi news channels date 28 September 2023 Iraqi News Agency, “INA.” it stated as follows:

“THE BIGGEST KNOT”

Iraqi Kurdish political researcher, Saman Nouh, said, “The biggest problem surrounding the draft law is related to the powers of investment, extraction, and marketing between the federal government and the Kurdistan Regional Government.”

He added in an interview with Al-Hurra website that the federal government wants “the law to ensure that it has the final say in extraction and marketing, that is, to effectively control oil sales and ensure that imports reach them exclusively, while the regional government emphasizes its right to extraction and marketing.”

Not to mention, “there are disagreements related to the management of the new oil fields, as their management is in coordination with the federal government, and therefore the law needs to detail the meaning of coordination, how it occurs, its nature, and its timing,” according to Noah.

Noah also points out disagreements regarding “the Federal Oil Council, which is supposed to govern the oil file, and these differences are not only related to the Kurdistan region, but also to the oil and gas producing provinces as well, and are represented in the powers of the council and who represents it, and the size of representation.”

He believes that these controversial points have led, for years, to not decide on the law and postpone it, especially since it is related to the resource that constitutes more than 90 percent of the country’s imports, and its settlement requires political decisions.

Noah asserts that after the Kurdistan region lost its “economic independence, he wants to legislate a fair and balanced law that is consistent with his interpretation of the constitutional rules and with the federal system that grants the region clear powers and does not impose the will of one party on the other. Therefore, he stresses that the law be issued by consensus and agreement on all the details.”

WHEN WILL IT BE APPROVED?

Representative Al-Muslimaoui said it was likely that the draft oil and gas law would be completed during “the current legislative term,” and he expected it to be approved in “the next legislative term after about four months.”

For his part, a member of the Oil and Gas Committee, MP Nazem Al-Shibli, according to what he told the Al-Hurra website, does not believe that the “large political parties” in the Council will be able to resolve “important files,” such as the draft oil and gas law.

He added that these parties use these “important files” as “electoral papers that allow manipulation of voters’ feelings, not to mention their economic returns and illegal contracts with international oil companies.”

The Iraqi academic and economic analyst, Abdul Rahman Al-Mashhadani, does not see any real glimmer of hope for the approval of “the draft oil and gas law in the current draft, especially since its economic impact may harm the central government in Baghdad.”

He explained in response to Al-Hurra website’s inquiries that if the law was passed in its current form, this would necessarily mean reducing treasury revenues, as every governorate would want to follow Erbil’s example that ownership of oil discoveries, after 2005, belongs to it, and a percentage of it is supplied to the treasury.

(This last statement above has a huge impact and importance.)

Al-Mashhadani believed that “if there is a real will to pass the law, the disputes must be ended with a consensual solution that satisfies and does not harm any of the parties concerned, and in a way that achieves a fair distribution of the governorates as a whole, and not just the oil governorates.”

COMMENTS ON THE DRAFT LAW

Iraqi legal expert, Ali Al-Tamimi, believes that the draft law needs more details and clarification in some of its articles, and the inclusion of additional articles in order to reduce the need for subsequent interpretations of it.

In response to Al-Hurra website’s inquiries, Al-Tamimi made ten observations on the draft oil and gas law, which include:

01-The draft law consists of 53 articles, requiring the establishment of the Federal Petroleum Council, which is headed by the Prime Minister and includes ministers and representatives from the governorates. It is responsible for setting petroleum policies, issuing instructions for implementing contracts, approving exploration, development and production, and approving concluded contracts.

02- The contracts must be signed by the Federal Ministry of Oil and approved by the Federal Oil Council within three months. However, the law did not specify the type of these contracts and it was preferable that they be service contracts only and not participation.

03- The law needs to impose on contracting companies to employ Iraqis exclusively, as other producing countries do. “This is important,” as he put it.

04- The subject of contracts prior to the enactment of the law, it must be explicitly stipulated and the problem with the contracting companies must be resolved according to the principle of joint management of the two parties, that is, the federal government and the region, with the exclusive right of action for the federal government in accordance with Article 135 of the Civil Code.

05- The draft law needs to explicitly stipulate the penalties affecting parties that conclude contracts in violation of this law, and also specify the regulatory authorities that have the right to review these contracts.

06-The draft law must explicitly stipulate all petroleum derivatives, not just oil and gas, according to his opinion.

07- The project must include the decisions of the Federal Court, which have become binding on all authorities, according to Article 94 of the Constitution, as he put it.

08- The draft law is so important that it must be presented for public consultation by specialists before its final draft is drawn up.

09- The details of the law must be expanded so as not to open the door to diligence when applying.

10- The ministerial platform presented by the current government stipulates the necessity of legislating this law, and if approved, it will represent a major achievement on which to build.

Just in November 2023:

NEW STATEMENT FROM OIL ON THE DRAFT OIL AND GAS LAW

The Ministry of Oil confirmed, today, Tuesday, that the government is proceeding with the approval of the oil and gas law, while indicating that its approval is subject to consensus.

The ministry’s spokesman, Asim Jihad, told the Iraqi News Agency (INA):

“The Al- Sudani Energy Ministry prepared the oil and gas law and submitted it to the government, and this law was discussed by the concerned authorities and the team formed by the regional government,” stressing that “the government is committed to approving this law.” Within the current government session, and it is also within the government curriculum for Al-Sudani’s term as prime minister.” In other words, it was a condition in which he took office and parliament voted to give him confidence as the new prime minister, so why would they also not commit to getting this passed.

(This is of course excellent new for us but can they actually do it?)

Just in November 12, 2023:

THE OIL AND GAS LAW RETURNS TO THE FOREFRONT… PARLIAMENT SPECULATES ON THE DATE OF ITS LEGISLATION AND DETERMINES THE REASONS FOR ITS DELAY

Today, Sunday (November 12, 2023), the Parliamentary Legal Committee commented on the latest developments in the legislation of the oil and gas law, by the House of Representatives, according to the political agreement between the blocs and parties.

Committee member Arif Al-Hamami told “Baghdad Today” that “legislating the oil and gas law requires the existence of a political agreement on the terms and paragraphs of the law, and this agreement does not currently exist,” pointing out that dialogues are continuing regarding it between the technical and legal committees between the central and regional governments.

Al-Hamami stressed that “there is seriousness on the part of the Iraqi government to legislate the oil and gas law due to its importance in regulating financial and oil relations with the region, but legislating the law requires careful study, and we believe that legislating the law will be the beginning of the new legislative chapter, that is, after the provincial council elections.”

The American Consulate in the Kurdistan Region confirmed on Tuesday (November 7, 2023) that it is following up on the issue of resuming the export of the region’s oil abroad, considering that resolving the disputes resulting from the lack of financial revenues in the region and ratifying the oil and gas law is a priority for it.

The Ministry of Natural Resources in the Kurdistan Regional Government said, “its Minister, Kamal Muhammad, received the new American Consul General in the Kurdistan Region, Mark Straw,” noting that the latter “expressed his country’s readiness to invest in the electricity, energy, and oil sectors.”

Straw said, according to the ministry’s statement, “We are closely following the issue of resuming the export of Kurdistan region’s oil abroad, and we know that stopping exports has had a significant impact on public financial revenues in the region,” noting that “solving the problem of lack of revenues in the region and ratifying the oil and gas law represents a priority.” Regarding Washington’s policies and agenda.”  

In turn, the Minister of Natural Resources in the Kurdistan Regional Government, Kamal Muhammad, praised the American role in contributing to solving the problem of the cessation of oil exports in the region abroad and the problems related to the oil and gas law.

***************************************************************************************************************

NEW NEGOTIATIONS BETWEEN BAGHDAD AND THE REGION TO PASS THE OIL AND GAS LAW

On Sunday, the representative of the Patriotic Union of Kurdistan, Nermin Maarouf, revealed the existence of a new round of negotiations between Baghdad and Erbil to resolve the outstanding differences between the two parties and reach long-term strategic agreements.

Marouf said in an interview with the Maalouma Agency, “Ending the disputes between Baghdad and the center regarding employee salaries, as well as focusing on legislating the oil and gas law.”

She added that “the lack of consensus between the political blocs is the main reason for delaying the approval of the oil and gas law,” stressing “the necessity for the two parties to reach long-term strategic agreements through which the oil and gas law will be approved.”

She continued, “The oil and gas issue and other issues are still thorny between the two parties, and we hope to reach final agreements regarding them.”

The representative of the Kurdistan Democratic Party, Sharif Suleiman, confirmed to “Al-Ma’louma” that “the oil and gas law is still with the formed government committee for consideration,” pointing out that the Kurdistan Region submitted a law proposal to the formed committee.