Kurds bad-mouth the fee-for-service approach to oil
In reply, the Kurdistan Regional Government resources minister Ashti Hawrami said at the 19th World Petroleum Conference in Madrid yesterday (Tuesday July 1) that the policy of his government is diametrically opposed to that. "Since when did the majors become consultants," he wanted to know, adding hat the contract on offer by Baghdad is "lousy" (AFP report from Madrid; the same remarks are featured in the AlHayat story this morning). He said Kurdistan has been highly responsible in offering contracts that are in accord with "proven international standards".
It had been expected that the initial short-term contracts, described as oilfield service agreements, covering six existing oil-production areas, would have been signed by now, but somehow this has turned into a dispute over production-sharing versus service-contracts. AFP put it this way:
Iraq said on Monday that it had failed to sign technical support deals with global oil majors hoping to cash in on boosting the war-torn country's extensive but underexploited oilfields.In any event, the main point being made by the AlHayat reporter this morning is this appears to have developed into full-scale dispute in principle between Baghdad and the Kurdistan region, not just over the nature of particular contracts, whether short- or long-term, but over the basic policy respecting service-contracts versus production-sharing.
Iraq is still negotiating with Shell, BP, ExxonMobil, Chevron and Total, and a consortium of other smaller oil companies, to develop six oil blocks and two gas fields, Oil Minister Hussein al-Shahristani told a press briefing.
"We did not finalise any agreement with them because they refused to offer consultancy based on fees as they wanted a share of the oil," he said.
"The TSAs (technical support agreements) are only simple consultancy contracts to help us raise the production during the interim period" before the ministry enters into long-term contracts to develop the oil and gas fields.
Not only that. The Kurdistan resources minister went on make remarks apparently aimed at chilling oil-company interest in the initial set of six short-term agreements being proposed by Baghdad. AlHayat:
Hawrami advised the global oil companies "not to use the contract on offer from the oil ministry without open bidding, because this is not in the interests of Iraq", and he said, "Iraq does not need office-studies done at a distance from outside Iraq; what it needs is investment and actual work by corporations on the ground."Notice the peculiar fact that he is warning the majors off dealing with Baghdad, not because this isn't in their own interest, but supposedly because this isn't in the interests of Iraq.
What the AlHayat reporter is pointing out is that over and above the details of particular negotiating situations, the fundamental disputes between Irbil and Baghdad are two: (1) Who can sign contracts; but also (2) whether government policy is to be for service contracts or for production-sharing contracts.
Oddly enough, this point has been completely absent from the recent outbreak of indignation over the initial proposed short-term contracts.
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