World News

Iraq lawmakers warn next govt may alter oil deals

BAGHDAD (Reuters) - International oil companies signing deals with Iraq are taking a big risk as the next government, to be elected in January, may revise or cancel those contracts, senior lawmakers said on Monday.

The warnings from lawmakers and uncertainty about who will win the Jan. 16 election mean that firms striking a spree of deals, which could rock the balance of power among oil states, are unlikely to invest heavily before the vote, analysts said.

“Oil companies, which expect to invest billions, should take into consideration the big risk behind these contracts,” said Ali Hussain Balou, head of parliament’s oil and gas committee.

“There are no guarantees for the oil companies that the new government will follow the same path in dealing with them. These contracts might be cancelled or at the very least revised,” said Balou, a Kurdish lawmaker and sharp critic of Iraq’s oil policy.

Iraq’s cabinet last week approved a deal for BP and China’s CNPC to develop the nation’s biggest oilfield, Rumaila -- the first contract to emerge from a landmark auction in June and Iraq’s first major oil deal since the 2003 U.S. invasion.

The auction and a second round in December are aimed at more than tripling Iraq’s current output of 2.5 million barrels per day as it desperately seeks the billions of dollars it needs to rebuild from decades of war and sanctions.

The BP deal was the only successful one in the first round of tenders in June. But other agreements are near to being clinched with ENI, Exxon Mobil and others after Iraq’s oil ministry sweetened its terms.

Iraq is also close to sealing a development agreement with Nippon Oil for the Nassiriya super giant field.

If all the deals come together, Iraq will catapult itself to third place among oil producers from 11th place now.


Samuel Ciszuk, Middle East energy analyst at IHS Global Insight, said the flurry of deals were ammunition for the government of Shi’ite Muslim Prime Minister Nuri al-Maliki as it seeks re-election and tries to convince voters it has done a good job.

“The (BP-CNPC deal) strengthens the government before the election. It gives them something to show on the oil side,” he said. Nevertheless, Ciszuk said he expected oil majors to keep investment restrained until after January’s national poll.

“Before we actually see any huge expenditure starting, we’ll know what happened in the elections,” he said.

Iraqi lawmakers said they expected the next government to be cautious about the deals that Maliki’s government has struck because they had not been approved by parliament.

Modern hydrocarbon legislation clarifying the rules for foreign investment has been stalled in parliament for years. The government says that in its absence, the cabinet has the authority to approve oil contracts. Parliament disagrees.

“Definitely the position of the next government will be different in dealing with these oil contracts due to the fact that they violated Iraqi laws,” said Jabir Khalifa Jabir, secretary of the parliamentary oil and gas committee.

The committee’s chairman, Balou, criticised the way the deals were being negotiated behind closed doors. In contrast, the auction in June was broadcast live on Iraqi television.

“At the beginning these contracts were launched publicly, but later they were shrouded by secrecy in dark rooms,” he said.

He also warned that the Organisation of Petroleum Exporting Countries was unlikely to allow Iraq to remain exempt from export quotas once it became a major crude producer.

Additional reporting by Jack Kimball and Waleed Ibrahim; Writing by Michael Christie; editing by Sue Thomas