Tag: Hydrocarbon law

The New York Times, on 10 September, published this story about the Iraq Government canceling oil field development contracts with Exxon-Mobil, Chevron, Shell, Total and BP.

While not particularly lucrative by industry standards, the contracts were valued for providing a foothold in Iraq at a time when oil companies are being shut out of energy-rich countries around the world.

“Not particularly lucrative” might well be interpreted to mean, they were not production sharing agreements in which the contractors, the oil companies, get ownership of a share of the oil. Rather than a share of the oil the agreements were technical service contracts in which the oil companies would be paid set fees for their services. This is the usual contractual format for services used in the other oil rich countries in the Persian Gulf Region.

According to those in the corporate world, the fighting and the lack of security in Iraq is no longer a major obstacle to getting at Iraq’s oil. The real problem now is the lack of a favorable hydrocarbon law.

Meet Michael Wareing. He is Prime Minister Gordon Brown’s business emissary to Iraq. His job is to bring international investors to Iraq to help stimulate economic growth.

Wareing is head of a well-connected auditing firm and was appointed head of a new Basra Development Commission. The Basra region has 70 percent of Iraq’s proven oil reserves and according to The Observer, Oil giants are poised to move into Basra. Wareing thinks security is no longer an issue for investors in Iraq.

‘If you look at many other economies in the world, particularly the oil-rich economies, many of these places are quite challenging countries in which to do business,’ he said. ‘Frankly, if you can successfully operate in the Niger Delta, that is a very different benchmark from imagining that Basra needs to be like London or Paris.’

Iraq’s parliament has yet to pass a hydrocarbon law setting out the terms oil companies will operate on and how profits will be split. ‘My sense is that many of the oil companies are very eager to come in now, and actually what they’re waiting for is the hydrocarbon law to be passed and various projects to be signed off. That is what is causing them to pause, rather than the security position,’ he said.