Iraq's Sunni-backed political bloc rejects gas auction

BAGHDAD Sun Oct 24, 2010 11:55am EDT

Iraq's Prime Minister Nuri al-Maliki arrives for a news conference after meeting Egypt's President Hosni Mubarak at the presidential palace in Cairo October 20, 2010. REUTERS/Amr Abdallah Dalsh

Iraq's Prime Minister Nuri al-Maliki arrives for a news conference after meeting Egypt's President Hosni Mubarak at the presidential palace in Cairo October 20, 2010.

Credit: Reuters/Amr Abdallah Dalsh

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BAGHDAD (Reuters) - A Sunni-backed, cross-sectarian alliance which won the most votes in Iraq's March election said on Sunday it rejected the government's auction of gas field contracts, adding a new element of uncertainty to the deals.

In the October 20 energy auction, South Korea's Kogas and Kazakhstan's KazMunaiGas Exploration & Production won a bid for Akkas field in western Iraq, while Kuwait Energy and Turkey's TPAO won the Siba gas field in Iraq's relatively peaceful southern oil hub of Basra.

TPAO, Kuwait Energy and Kogas won rights to a third gas field, Mansuriyah, near the Iranian border.

The Iraqiya alliance led by former premier Iyad Allawi, which won two more seats in the 325-seat parliament than Prime Minister Nuri al-Maliki's coalition, said it did not believe the outgoing government had the right to strike such deals.

"(Iraqiya) strongly condemns the outgoing government's actions to offer license rounds with long-term contracts and overstepping its constitutional mandates," Iraqiya said in a statement.

Iraqiya warned that current deals -- including oil deals signed earlier in the year -- could be canceled once a new government is in place.

Neither Allawi's nor Maliki's blocs won enough seats in parliament to gain a working majority and both sides have been locked in seven months of so-far unsuccessful negotiations with other groups to form a coalition government.

During the election campaign, Allawi told Reuters he would honor deals signed with global oil majors which had the potential to quadruple Iraq's crude output capacity to Saudi levels of 12 million barrels per day.

The oil deals were auctioned in two bidding rounds last year. This month's gas auction took place in the political deadlock that followed the inconclusive March vote.

"These actions are also considered illegal in light of the current constitutional and political vacuum engulfing the country," Iraqiya said.

Iraq needs to exploit its vast oil and gas wealth to rebuild after decades of dictatorship, war and economic sanctions. About 95 percent of the federal budget comes from oil revenues.

Persistent opposition from some regions to the central government's plans to open up the energy sector for foreign investors has raised risks and uncertainty around the oil and gas contracts.

Some lawmakers say the contracts all need to be approved by parliament, a view opposed by the oil ministry.

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