Iraq’s proposed energy law, intended to spur foreign investment in the world’s fifth-largest holder of oil deposits, will be delayed for the rest of this year due to political divisions, the prime minister’s top adviser said.
The draft law, held up since 2005, may resolve a dispute about oil revenue and sovereignty between the central government and the country’s semi-autonomous Kurds that has blocked an agreement with Exxon Mobil Corp. (XOM), Thamir Ghadhban said in an interview in Baghdad. Kurdish authorities in northern Iraq angered the government by signing a separate contract with Exxon, which operates one of the nation’s largest oil fields.
“I am not optimistic that the energy law will be adopted in the coming months, and I would be happy if it is adopted by the end of the year,” Ghadhban said today. “The more the law is delayed, the more we will have problems such as the one with Exxon Mobil.”
Iraq has awarded 15 licenses for drilling rights to foreign companies since the U.S.-led invasion that ousted President Saddam Hussein in 2003. The Arab nation is the third-largest oil producer in OPEC, pumping 2.75 million barrels a day in January, according to data compiled by Bloomberg News. Exxon, with Royal Dutch Shell Plc (RDSA), operates the West Qurna Phase 1 field in southern Iraq.
Measures Against Exxon
Authorities in Baghdad have refused to recognize production-sharing agreements between foreign companies and the Kurdistan Regional Government. Iraq was “weighing measures” that it may take against Exxon after the company signed what the central government considers to be illegal contracts with the Kurds, Hussain al-Shahristani, deputy prime minister for energy affairs, said last month.
Ghadhban, a former oil minister, said Iraq’s capacity to produce crude will increase by 400,000 barrels a day this year to exceed 3 million barrels a day by the end of December. Production capacity will rise next year by an additional 500,000 barrels a day, and crude exports in 2013 will reach 2.6 million barrels a day, including 175,000 barrels a day from the Kurdish region, he said.
Iraq’s first of four new single-point mooring facilities will start operating next week once the contractor completes work “such as linking the pipelines,” Ghadhban said. Each of the four offshore loading points, which are due to be installed by 2013, will add 850,000 barrels a day of capacity.
New Export Route
Iraq is determined to pursue plans to open new crude export routes from neighboring Syria, following threats by Iran to close the Strait of Hormuz in response to international sanctions on its energy industry. “The Oil Ministry has been working for a while with Syria, regardless of the current events there, to open new routes to export crude oil, and which is part of the plan to increase export capacity,” he said.
Ghadhban said the government has not been able to attract investors to build new refineries for the last few years, even if it has offered some financial incentives, he said. The Oil Ministry may offer partnership agreements to foreign companies to encourage them to invest in new refineries, he said. Iraq currently imports 9 million liters of benzene a day and 3 million liters of gasoil a day to meet local demand, which exceeds production capacity, he said.
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