Iraq's Allawi Bloc Says Oil, Gas Licenses are Illegal, may be Canceled

The political bloc led by former Iraqi Prime Minister Ayad Allawi said today that oil and natural-gas development contracts awarded by the outgoing government of Nuri al-Maliki are illegal and may be canceled.

Allawi’s bloc, which won the largest number of seats in March elections, said it “strongly condemns the outgoing government’s actions to offer license rounds with long-term contracts and overstepping its constitutional mandates.”

The actions are also “considered illegal in light of the current constitutional and political vacuum engulfing the country, which exposes the oil ministry and all parties concerned to legal questioning and which may also lead to the cancellation of these contracts,” the bloc called Al-Iraqiyah said in an e-mailed statement.

The licenses are illegal, it said, because they were signed “with no reference to current laws such as Law 97 of 1967, which requires the consent of the Iraqi Parliament in the absence of a Federal Oil and Gas Law.”

Parliamentary elections in Iraq on March 7 produced no clear winner, and political parties, including the rival blocs led by Allawi and Maliki, have been struggling since then to form a government. Maliki’s outgoing government has said repeatedly that signed hydrocarbon contracts would not be cancelled.

Natural-Gas Contracts

Kuwait Energy Co., Turkiye Petrolleri AO and KazMunaiGaz National Co. of Kazakhstan secured rights to develop three Iraqi natural-gas fields, at an auction on Oct. 20. The Akkas, Mansouriya and Siba gas fields together hold 11 trillion cubic feet of fuel.

Last week’s gas licensing round was the third for hydrocarbon development contracts since the U.S.-led invasion that toppled President Saddam Hussein in 2003. Iraq won pledges from oil producers including Exxon Mobil Corp. and OAO Lukoil to boost the country’s total crude output to 12 million barrels a day after two licensing rounds last year.

Iraq relies on oil for most of its income and is seeking foreign investors in other parts of the economy after years of conflict and sanctions.

To contact the reporter on this story: Nayla Razzouk in Amman at nrazzouk2@bloomberg.net

To contact the editor responsible for this story: Maher Chmaytelli at mchmaytelli@bloomberg.net

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