Iraq’s Oil and Gas Law: A step toward resolving Baghdad-Erbil disputes
Shafaq News/ On Saturday, Iraq’s Parliamentary Oil and Gas Committee said that finalizing and approving the draft Oil and Gas Law could pave the way for resolving longstanding disputes between the federal government and the Kurdistan Regional Government (KRG).
Bassem al-Gharibawi, a Committee member, told Shafaq News Agency, "Agreeing on the draft law, approving it in the Council of Ministers, and then submitting it to Parliament will contribute to addressing many unresolved issues between the federal and regional governments."
The federal government had previously formed a committee, including the Deputy Prime Minister for Energy Affairs, the Deputy Prime Minister for Economic Affairs, and Iraq’s State Organization for Marketing of Oil (SOMO), to negotiate with the KRG. Their task was to amend disputed clauses and prepare a final draft of the law.
"The parliamentary oil committee hosted several officials from the Oil Ministry during the last legislative session to discuss the articles requiring amendment in the Oil and Gas Law," Gharibawi added.
The push for legislation comes amid rising tensions over oil exports. Last week, economist Nabil al-Marsoumi revealed that nine foreign companies are demanding $24 billion in compensation for halted exports. This follows an Iraqi court ruling that invalidated Baghdad’s objections to contracts between the KRG and these companies.
The Karkh Court of Appeals upheld the validity of the contracts, declaring them binding and immune to external objections, despite a February 2022 decision by Iraq’s Federal Supreme Court that deemed the KRG’s oil practices unconstitutional.
The Oil and Gas Law, pending since 2005, stipulates that Iraq’s oilfields should be managed by a national oil company under the supervision of a federal council. However, disagreements over the management of oilfields in the Kurdistan region have remained unresolved since 2003.
Baghdad accuses Erbil of failing to disclose accurate oil revenue figures and withholding proceeds from the federal treasury. In contrast, the KRG insists on full control over its oilfields, including licensing, production, export, and contracts.
The KRG’s Oil Law grants the regional government authority over oil operations, marketing, and contract negotiations. However, it allows federal participation only in pre-2005 discovered fields, with sole control over fields discovered afterward.
Iraq exports an average of 3.3 million barrels of crude oil daily, with oil revenue constituting over 90% of the country’s income. Yet, discrepancies in production costs and revenue sharing between Baghdad’s licensing rounds and the KRG’s operations have exacerbated tensions.
In May 2023, Iraq’s Oil Ministry accused the KRG of “legal and procedural violations” in oil sales, resulting in significant financial losses. The ministry highlighted that federal licensing rounds yield higher returns (up to 96.5% revenue) compared to the KRG’s operations (around 80%).
In August 2023, the Iraqi government formed a committee, including federal and regional oil officials and representatives from oil-producing provinces, to finalize the draft law. The initiative aligns with Prime Minister Mohammed Shia al-Sudani’s recent agreement with the KRG to resolve contentious issues, including implementing Article 140 on disputed territories.
While the Federal Supreme Court’s 2022 ruling restricts the KRG’s oil exports to federal oversight, the draft law could redefine governance structures and provide a legal framework for cooperation.
