Ten deals makes a happy minister - Iraq Oil Report

Ten deals makes a happy minister - Iraq Oil Report

Ten deals makes a happy minister
By Ben Lando of Iraq Oil Report
Published February 4, 2010
BAGHDAD - Even in the cut-throat world of modern Iraqi politics, there may be no one who has persevered like Iraq's Oil Minister, Hussain al-Shahristani.

He holds a highly politicized job as Iraq decides how decentralized and denationalized its oil sector will be. He's being urged to act fast, since Iraqi oil sales are nearly the sole source of revenue for the country, which needs to fund expensive reconstruction efforts.

Iraq has massive reserves – the world's third largest discovered and plenty more to find – but wars, sanctions and dictatorship have left Iraq under-producing and its oil infrastructure in a dire state. Efforts to streamline an overloaded system have been caught up in political battles, including multiple pieces of legislation to set ground rules for governance and investment.


Thus, while Shahristani was condemning the oil deals signed by Iraq's Kurdish region, he was criticized for simultaneiously being too stern and too generous to foreign oil companies in a one and a half year process that culminated with two auctions last year and 10 oil contracts awarded to some of the world's biggest oil companies.

Iraq Oil Report Bureau Chief Ben Lando caught up with Shahristani after a recent deal signing ceremony.

Ben Lando: You seem to have a smile on your face everywhere I see you nowadays.

Hussain al-Shahristani: It is a big accomplishment for a country that has been deprived of its oil resources for decades and where revenues have been used to wage wars and to destroy Iraq and the neighboring countries. For the first time the people of Iraq feel they are going to have a significant production of oil, based on contracts that preserve for Iraq its control over its oil and the type of the contract, being a service contract, has been very welcomed by the Iraqi people. The level of production that will be achieved is very significant.

BL: More than 12 million barrels per day, yes. Is this a vindication of your policies? You've had a lot of detractors and you've still gone forward.

HS: We have full confidence in our policy and we knew that we and the international oil companies working together can reach very high levels. But quite frankly I was not expecting to see 12 million barrels (per day) within six years. But now this is contracted for. This is not wishful thinking anymore but this is something we have signed with these oil companies. We are very pleased to see such an enthusiastic acknowledgement, acceptance by the Iraqi people, by the Iraqi politicians, at all levels, actually.

BL: You still have this lingering dispute with the government in the north (the Kurdistan Regional Government). How is that going to be overcome? It seems that it still is at a standstill.

HS: The difference in the views about the oil deals that the KRG has signed has nothing to do with these contracts. As you know these contracts are in the south and the center and some of them near Mosul.

BL: Sure, but politics can always stall things.

HS: The politics, or differences in views in this particular case, has no affect whatsoever on these contracts. As a matter of fact these are going to go ahead.

BL: Will there ever be an acceptance from your Oil Ministry or Baghdad of the contracts in the Kurdish region?

HS: We have always said and told them that these contracts have to be reviewed by the ministry of oil. We have to make sure that they provide Iraq with the best or highest revenue possible and they have to be approved by the Iraqi government like any other oil contract. All of these have to go to the cabinet for approval. And without that we cannot really accept them. That position remains the same. However, recently they've indicated they're willing to send these contracts for review and we will be happy to do that. Without reviewing them we cannot really say. But now, everybody realizes the kind of contracts that Iraq is able to get, the kind of service fees the companies are willing to pay and we have to be in conformity basically with the general form of contracts in the country.

BL: So you've set a benchmark for the minimum you're willing to accept form contracts so if the contracts in the north don't meet those standards of return on investment, the production, generating the wealth for the Iraqi people, then there's no way that you'll accept them?

HS: No, I didn't say that. I said I cannot comment without viewing them. Without reviewing those we cannot really comment.

BL: But these are production sharing contracts, something that you've said you are not at the stage of signing if you ever will be at the stage of signing. You've gone for service contracts. These are definitely different contracts than what you have signed and they give a lot more return on the investment to the foreign companies.

HS: That's why we have been saying that they have to be reviewed and amended accordingly.

BL: How similar to your numbers that you've been able to reach do they have to be? Do they have to be at those numbers of returns?

HS: I cannot really answer that question without seeing those contracts and without talking to the cabinet, because after all the decision is not only of the oil ministry. These contracts have to be approved by the government.

BL: is there any timeline for this? Are there any meetings set up to review these contracts?

HS: There are discussions now and there are proposals. Not for approving the contracts because that will take much longer and a lot of discussion, as you said, there are serious differences between these contracts that cannot be resolved so quickly. But there are other suggestions without having to accept those contracts how we can start moving forward