Iraq still faces hurdles to pass oil law

Abdul-Hadi al-Hasani, deputy head of Iraq's parliamentary energy committee, said the new rules would pass before the end of the year -- but only after significant amendments to the draft Baghdad approved in July after months of wrangling.

Hasani said parliament will want to include controversial annexes that list the oilfields to be controlled by a new national oil company and detail the contract models to be used to develop the dilapidated sector, which accounts for over 90 percent of government income.

In the next few weeks it will be put forward for a first reading, then we have to come back and discuss it before voting, Hasani said.

It is going to be hotly debated. I believe there will be a lot of amendments put forward.

The government-approved draft, in limbo for a month while parliament broke for summer, will initially be submitted without the annexes.

If parliament wants the law with annexes, we'll have to send them, said Thamir Ghadhban, energy adviser to embattled Shi'ite Muslim Prime Minister Nuri al-Maliki.

That could be done within a few days.

Ghadhban said he hoped parliament would leave the disputed annexes to a new Federal Oil and Gas Council which could allow for approval of the new law in weeks.

Hasani told Reuters that members of parliament would want to sit on the council, another possible point of contention.

Washington has pushed Iraq for months to speed up the passage of the oil law and other key legislation, which it sees as pivotal to reconciling warring Iraqis, rebuilding Iraq's shattered economy and attracting foreign investment.

The Kurds, who govern a semi-autonomous region in northern Iraq, were likely to vote in favor of the existing draft, Iraqi officials said, but opposed some of the proposed amendments.

After waiting months for Baghdad to pass the federal law, the Kurds passed their own oil law in August. Long before that, the Kurds had signed five production sharing agreements (PSA) to develop fields in the northern region.

The central government has clashed with the KRG over such contracts. Hasani said PSAs were not ideal for Iraq and that under the constitution federal law overrules regional, meaning any contracts contradicting the federal law would become void.

KURDISH VIEW

The Kurds forced the renegotiation of the federal oil law, fearing it gave Baghdad too much control. They say the PSAs signed were in line with the constitution and the law.

Hasani said parliament was still looking at various types of contracts as it looked to find terms that were both attractive to the government and international oil firms.

Ghadhban said the federal council would decide on which contracts were appropriate for each field and that no model had been ruled out.

The oil law is being drawn up in four parts. The first is a framework law, while the others focus on revenue-sharing, the new state oil firm and the oil ministry. Some say it would be best to pass them together since they are interrelated.

Parliament will not vote on the oil law until we have a revenue-sharing law. We will vote on them as a package, Sami al-Askari, adviser to Maliki, told an Iraqi oil conference in Dubai. Askari said that different factions had already debated the law extensively and that he expected it to pass quickly.

With or without amendments, this law will pass.