Iraq officials attack Oil Ministry, urge new policy

BAGHDAD/SWEIMEH, Jordan (Reuters) - Iraq’s Oil Ministry came under renewed pressure to change its policies on Saturday after officials strongly criticized a lack of progress in raising flagging oil exports.

Parliament’s Oil and Gas Committee submitted a petition signed by 140 members of parliament -- only 25 signatures were required -- summoning the Oil Minister to answer complaints of “incorrect policies” and “huge shortages” in oil revenues.

One of Iraq’s two vice presidents, Adel Abdul-Mahdi, said separately he was “unhappy” and “unsatisfied” with a lack of progress in overhauling Iraq’s dilapidated oil sector, adding foreign investment must be dealt with in an “open minded way.”

Iraq’s oil industry is in tatters after years of war and sanctions, but few major deals have yet been signed with the foreign firms Iraq says it needs to rehabilitate the sector.

Oil Minister Hussain al-Shahristani has shunned production sharing contracts, in which oil firms get a share of oil revenues from fields they develop, and has instead offered fixed fee contracts, which some oil majors say are not enticing.

Wrangling over payment and other terms scuppered short-term service contracts Iraq had previously offered, but the Oil Ministry is now pursuing two bidding rounds for major development deals.

Iraq’s oil and gas legislation, which would give a legal framework to foreign investment, has been delayed for years due to squabbles between Iraq’s Kurds and the Baghdad government.


“About the oil industry ... no, I’m not happy with what we did there since 2003. Six years without real contracts, without a refinery contract,” Abdul-Mahdi told reporters at the World Economic Forum at the Dead Sea in Jordan.

“We need foreign investment and we need to go forward and deal with those issues in an open minded way, open to the necessities of market and new economic realities, which are not realized by many of our colleagues,” he added.

Iraq exports about 1.8 million barrels per day, down from a post-Saddam peak of some 2 million bpd this month last year.

Falling oil prices have pushed the lack of progress into the spotlight after the government cut Iraq’s 2009 budget three times, leading many to politicians to predict a financial crisis in 2010. Iraq has the world’s third largest proven oil reserves and derives almost all its revenues from oil sales.

“Parliament’s Oil and Gas committee has submitted a petition ... to summon Iraq’s Oil Minister in light of the deterioration of oil production and (his) incorrect policies, which resulted in huge shortages in oil revenues,” a committee statement said.

It was not clear when Shahristani would be summoned.

“In 2010 we expect Iraq is going to face a major financial crisis, so we cannot wait until the catastrophe happens,” Ali Hussain Balou, head of parliament’s Oil and Gas Committee, said.

The Oil Ministry this week replaced the head of Iraq’s South Oil Company, responsible for the bulk of Iraqi oil exports and production, as part of an industry reshuffle to boost exports.

Writing by Mohammed Abbas and Yara Bayoumy; Editing by Ruth Pitchford