ERBIL, Kurdistan Region - Contents of the Kurdistan Region’s oil contracts with international countries violate articles of the Iraqi constitution, the Iraq National Oil Company said in their financial examination of the contracts published on Thursday, because they provide foreign companies with “absolute power” over the process in the Region.
The Iraqi oil ministry in February requested the Kurdistan Regional Government (KRG) to hand over their contracts and agreements with other countries and oil companies, for the purpose of reviewing and amending them. The report from the oil company, which is part of the ministry, is an analysis of the contracts, and deems the KRG’s oil agreements to be a violation of the 2005 Iraqi constitution.
Iraq’s constitution tasks the federal government with running the country’s “present” oil fields but that does not prevent it from running fields that may be found in the future, the report said, as the contrary would create “illogical results.” Some regions, most likely referring to the Kurdistan Region, have used this as an excuse to participate in the earnings of previous fields, as well as taking sole control of fields found after the implementation of the constitution, it added.
The KRG has often used the term “present fields” from Article 112 of the Iraqi constitution to justify controlling oil fields that were found after the implementation of the constitution in 2005.
The report claimed that the KRG’s contracts with international companies and the exportation of extracted oil and gas is a violation of the Iraqi constitution as it withdraws the power from the federal government to run the country’s oil and gas sector.
The oil company also criticized the KRG for giving “absolute power” to foreign companies and contractors in their agreements, which it also deemed to be unconstitutional since according to Article 111, oil and gas are the property of the Iraqi people.
“In production-sharing contracts for the Region’s fields, the contractor is given a share of the extracted oil in addition to the freedom to handle its share of the produced quantities and selling it at a place and time specified by the contractor, which violates Article 111 of the constitution,” the report read.
The company’s review added that the KRG’s contracts have resulted in great profits for foreign companies due to exempting the contractors from any form of taxation.
In addition to this, the report cites the bilateral agreements with foreign companies without involving the federal government as another reason for the high income of the contractors.
“The financial returns to the Regional government are no more than 80% as an average after deduction of costs Production (the cost of producing a barrel of oil), while the financial returns for licensing rounds amounted to more than 94.5% to 96.5%, where the cost of producing one barrel is equivalent to four times the cost of producing a barrel for licensing rounds at the Federal Ministry of Oil,” the report stated.
Iraqi Oil Minister Ihsan Abdul Jabbar said on Saturday that the Iraqi government has no desire to control the Kurdistan Region’s oil and gas activity, but only to turn it into a “clear and transparent” business activity.
Kurdistan Region Prime Minister Masrour Barzani on Wednesday said the KRG is in continuous negotiations with the Iraqi federal government regarding Kurdish oil, and that it aims to reach a “constitutional conclusion.”
The KRG passed its oil and gas law in 2007, enabling it to administer and develop its own oil and gas resources.
The Iraqi Federal Supreme Court’s decision found the law to be “unconstitutional” in February, therefore striking down the legal basis for the independence of the Kurdistan Region’s oil and gas sector. Kurdish leaders have slammed the decision repeatedly.
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