In my last column I said the “Iraqi people were recently rewarded by a law to establish their National Oil Company, a crippled law that will serve its formulators rather than the industry. After waiting for more than ten years, the law was voted so quickly that something is fishy about it.”
Although speedily ratified by the president, who is known to take more than his time on more urgent laws such as this year’s budget, it has not been published by the official gazette. And the only draft available is that leaked by parliamentarian.
The draft is full of ambiguities and loopholes to allow its advocates to play havoc with Iraq most prominent resource. But the law’s most vulgar feature is that it “gives the government up to 90 per cent”.
Hydrocarbon revenues are sovereign and owned by all Iraqis and cannot be trusted to whims and wishes of a board of directors that comes and goes.
The other 10 per cent, the company wants to divide it between a “citizen fund”, a “reconstruction fund” and a “generations fund”. These are activities of a government and not a company and the pittance for each is a laughable matter.
The initiators of this law did not even bother to look at the magnitude and experience of other funds.
There are items in this law that almost gives this company the status of a foreign entity as it is exempt from a large number of the Iraqi financial and administrative laws, including residency to foreign nationals and special salary scale for staff.
This will not work in Iraq given the sentiments of its people and previous experiences. The company will always be on a collision course with the marginalised Ministry of Oil and other government departments.
The law in its current format was not the proposal of the Ministry of Oil and the council of ministers. The draft from the Ministry of Oil has been swept aside but, shamelessly, it gave support to a law that will marginalise it.
The law indirectly legitimises the actions of the Kurdistan Regional Government while the disputes and illegalities of the last 15 years are swept aside. The minister of KRG is to be a member of the board of the company. This explains the fact that Kurdish members of parliament voted in favour and the Kurdish president was quick to ratify.
The above are just few examples of the shortcomings of the law. There is already a strong movement to launch a case with the Constitutional Court to scuttle the law. Even some of its strongest advocates are now saying “let us pass the law and think of its amendments”, which reminds me of the promised amendments of the constitution 10 years ago.
The law is one sided as its advocates clearly want this company to be a strictly upstream entity without any responsibility to other sections of the industry, which are of immediate importance to the Iraqi people. The statements that the company may invest in the conversion of oil and gas is just to sweeten the law without any reference to the existing oil refineries, gas processing plants, products’ pipelines and domestic marketing facilities.
This is a relic of the past when international oil companies which used to say that their business is only to produce crude oil and sell it. Unfortunately, even the defunct national oil company, which was amalgamated with the Ministry in 1987, was of the same attitude.
In the promulgated company, the downstream industry is not even represented in the board of directors.
Why did our legislators not just look at Saudi Arabia, UAE and Kuwait with their fully integrated national oil companies? Aramco today boasts of 10.5 million barrels a day (mbd) of oil production, 3.1-mbd of modern and complex refining capacity, the equivalent of 3-mbd of gas production and processing, and a huge chemical and petrochemical production. Aramco is capable of attracting foreign partners especially for their technical credentials and market potential.
On a smaller scale the same can be said about the UAE and Kuwait companies.
It’s a shame that Iraq, one of the oldest oil producers, ends up with such a misguided law and which must be scuttled.
