Iraq still faces hurdles to pass oil law

By Lin Noueihed and Simon Webb

DUBAI (Reuters) - Iraq's parliament must overcome major disagreements over control of the world's third biggest oil reserves before it can pass a vital oil law to lure billions in foreign investment, Iraqi officials said on Monday.

Abdul-Hadi al-Hasani, deputy head of Iraq's parliamentary energy committee, said the new rules would pass before the end of the year -- but only after significant amendments to the draft Baghdad approved in July after months of wrangling.

Hasani said parliament will want to include controversial annexes that list the oilfields to be controlled by a new national oil company and detail the contract models to be used to develop the dilapidated sector, which accounts for over 90 percent of government income.

"In the next few weeks it will be put forward for a first reading, then we have to come back and discuss it before voting," Hasani said.

"It is going to be hotly debated. I believe there will be a lot of amendments put forward."

The government-approved draft, in limbo for a month while parliament broke for summer, will initially be submitted without the annexes.

"If parliament wants the law with annexes, we'll have to send them," said Thamir Ghadhban, energy adviser to embattled Shi'ite Muslim Prime Minister Nuri al-Maliki.

"That could be done within a few days."

Ghadhban said he hoped parliament would leave the disputed annexes to a new Federal Oil and Gas Council which could allow for approval of the new law in weeks.

Hasani told Reuters that members of parliament would want to sit on the council, another possible point of contention.

Washington has pushed Iraq for months to speed up the passage of the oil law and other key legislation, which it sees as pivotal to reconciling warring Iraqis, rebuilding Iraq's shattered economy and attracting foreign investment.

The Kurds, who govern a semi-autonomous region in northern Iraq, were likely to vote in favor of the existing draft, Iraqi officials said, but opposed some of the proposed amendments.

After waiting months for Baghdad to pass the federal law, the Kurds passed their own oil law in August. Long before that, the Kurds had signed five production sharing agreements (PSA) to develop fields in the northern region.

The central government has clashed with the KRG over such contracts. Hasani said PSAs were not ideal for Iraq and that under the constitution federal law overrules regional, meaning any contracts contradicting the federal law would become void.

KURDISH VIEW