Iraq cabinet endorses changes to draft oil law

BAGHDAD Tue Jul 3, 2007 5:53am EDT

A general view of Sheaiba oil refinery in Basra, 340 miles south of Baghdad, March 29, 2007. Iraq's cabinet approved changes to a draft oil law on Tuesday, taking a big step towards meeting a key political target for national reconciliation set by the United States. REUTERS/Atef Hassan

A general view of Sheaiba oil refinery in Basra, 340 miles south of Baghdad, March 29, 2007. Iraq's cabinet approved changes to a draft oil law on Tuesday, taking a big step towards meeting a key political target for national reconciliation set by the United States.

Credit: Reuters/Atef Hassan

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BAGHDAD (Reuters) - Iraq's cabinet approved changes to a landmark draft hydrocarbon law on Tuesday and will submit the bill to parliament after months of bickering between the central government and Kurdish officials.

"The cabinet has endorsed the oil law and is sending it to parliament," government spokesman Ali al-Dabbagh told Reuters.

The draft, crucial to regulating how wealth from Iraq's huge reserves will be shared by its sectarian and ethnic groups, was originally approved by the cabinet in February but faced stiff opposition from Kurds, who felt they were getting a bad deal.

Washington has been pressing Iraq's leaders to speed up passage of the oil law and other measures it views as crucial to spurring national reconciliation and ending sectarian violence between majority Shi'ites and minority Sunni Arabs.

Officials from the largely autonomous region of Kurdistan said on June 21 they had reached agreement with the central government on equitably sharing revenues but that negotiations would continue on other disputed annexes.

Dabbagh separately told Al Arabiya television that an oil council would be formed to draw up oil policy and approve all contracts.

The council would allow regions and provinces to hold talks with oil firms but approval of contracts would be authorized by the central government through the council, he said.

"Some issues were settled and the Kurdish bloc agreed to them," Dabbagh told Al Arabiya.

He said the council would comprise officials from each oil producing region, a representative from the oil ministry and the prime minister's office as well as independent experts.

Officials from the Kurdistan regional government were not immediately available to comment.

The Kurds had previously said some of the annexes were unconstitutional because they wrested oilfields from regional governments and placed them under a new state oil company.

The annexes also covered control over discovered and undiscovered oilfields and who would have the power to negotiate contracts with international oil companies.

Under the revenue sharing component that was agreed last month, the Kurdistan region would take 17 percent of all oil revenue, with the money deposited into a Kurdistan regional account in the central bank, Kurdish officials have said.

Iraq sits on the world's third-largest oil reserves. Officials have been struggling since last year to finalize the draft law, which is vital for Iraq to attract investment from foreign firms to boost its oil output and rebuild its economy.

Most reserves are in the Kurdish north and Shi'ite south, underscoring the need for equitable distribution to ensure Sunni Arab provinces in central Iraq get a fair share of revenue.

The main Sunni political bloc is currently boycotting cabinet meetings over legal steps being taken against one its ministers. Dabbagh told Reuters that ministers from the Sunni Accordance Front were not at Tuesday's cabinet meeting.

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