Hydrocarbon Law....when

[COLOR="Red"]We have almost all have read this law, now we are waiting for it to be published in the gazzette....but when will this happen?

Preamble
CHAPTER I: Fundamental Provisions
ARTICLE 1: Ownership of Petroleum Resources
ARTICLE 2:Scope of Application
ARTICLE 3 :Purpose
ARTICLE 4 :Definitions
CHAPTER II: Management of Petroleum Resources
ARTICLE 5 :Comp****ce Of Authorities
ARTICLE 6: Creating the National Iraqi Oil Company
ARTICLE 7: Re-Arranging the ministry of oil
ARTICLE 8: Oil Fields’ development and production
ARTICLE 9: Grant of Rights
ARTICLE 10: Mechanisms of negotiations and contracting
ARTICLE 11:Oil revenue
ARTICLE 12: Participation of the State
CHAPTER III: UPSTREAM OPERATIONS
ARTICLE 13 :Exploration and Production Contract
ARTICLE 14: obligations of the Holders of Exploration and Production right
ARTICLE 15: building local expertise
ARTICLE 16: Unitisation
ARTICLE 17: Conservation
ARTICLE 18: Access to Main Pipelines and Field Pipelines
ARTICLE 19: Ownership of Data
ARTICLE 20: Restrictions on Production Levels
CHAPTER IV: Transportation
ARTICLE 21: Main Pipelines
ARTICLE 22: Rights and Obligations regarding Pipelines
CHAPTER V: Natural Gas
ARTICLE 23: investment of Gas
ARTICLE 24: Associated Gas
ARTICLE 25: Flaring of Natural Gas
ARTICLE 26: Non-Associated Gas
CHAPTER VI: Regulatory Matters
ARTICLE 27: Regulations for Petroleum Operations
ARTICLE 28: Use and Benefit of Land and Rights of Way
ARTICLE 29: Access to Zones Subject to Maritime Jurisdiction
ARTICLE 30: Inspection
ARTICLE 31: Environmental Protection and Safety
ARTICLE 32: Transfer of Ownership and Decommissioning
CHAPTER VII: Fiscal Regime
ARTICLE 33: General Principles of Taxation
ARTICLE 34: Royalty
ARTICLE 35: Maintaining Records
CHAPTER VIII: Miscellaneous Provisions
ARTICLE 36: Transparency
ARTICLE 37: implementing anti-corruption laws
ARTICLE 38: attracting competitive participation
ARTICLE 39: Resolution of Disputes
ARTICLE 40: Existing Contracts
ARTICLE 41: Changing Administrative Boarders [creating new regions]
ARTICLE 42: Relationship to Existing Legislation
ARTICLE 43: Entry in Force
Appendix 1: Discovered and developed fields controlled by the INOC
Appendix 2: Discovered but not developed yet field controlled by the INOC
Appendix 3: Discovered but not developed yet field not controlled by the INOC
Appendix 4: discovery areas
PREAMBLE
WHEREAS the Iraqi Republic has entered a new era after the adoption of the
Constitution In 2005;
WHEREAS, ARTICLE 111 of the said Constitution declares Oil and Gas as the
property of the whole nation in all Its Provinces and Governorates;
WHEREAS, ARTICLEs 110, 112, 114 and 115 seen in the light of ARTICLE 111
broadly define the authorities and responsibilities of the Federal and Provincial
authorities within the Petroleum sector;
WHEREAS, the Iraqi Republic is endowed with rich Oil and Gas resources, a great
portion of which is already discovered and ready for Development whilst more
Petroleum resources are yet to be discovered;
WHEREAS, Iraq's Production capacity during the last decades has been low and at
great disparity with its exceptionally rich Oil and Gas resources;
WHEREAS, the Iraqi nation finds Itself at the crossroad to a new and more
prosperous future which will require quick and substantial funding of reconstruction
and modernization projects;
WHEREAS revenues from oil and Gas represent the most important basis for
redeveloping the country in general and the Iraqi economy In particular on sustainable
and robust basis in a planned and coordinated manner that takes into consideration the
objectives of the Constitution Including the unity of the Iraqi Republic, the
exhaustible nature of Petroleum resources, the need for preserving the environment;
To help the Iraqi Ministry Of Oil focus on its main duties of creating policies,
planning, and supervision, while achieving the necessary upgrading to enhance
operational quality, the oil activates operated solely by the Ministry of Oil have to be
transferred to technical and commercial entities and institutions including an
independent national Iraqi oil company, and the Iraqi provinces and regions should be
given more authorities.
WHEREAS. the rehabilitation and further development of the petroleum Industry will
be enhanced by the participation of international and national investors of recognized
technical, managerial and operational skills as welt as robust capital resources to help
upgrade and develop national expertise and efficiency in the petroleum sector;
WHEREAS, the national private Industry directly and indirectly related to the
Petroleum sector are in need of proactive encouragement and support to play a
prominent role in the development of the sector;
WHEREAS, the positive interplay between the Federal and Provincial authorities
requires appropriate legislative and institutional framework conditions to ensure
efficient co-ordination;
WHEREAS, the introduction of a variety of national and international players in the
development of the Petroleum sector calls for clear legislative, institutional and
operational framework conditions to ensure co-ordination and efficiency between the
Iraqi authorities and the commercial players as well as among these players;
WHEREAS, the development of the petroleum sector must be closely coordinated and
harmonized with the development of the society and the national economy in a
manner that maintains sustainable development for the economy and the environment
and in the long term decreases dependence on Oil and Gas revenues;
WHEREAS, the terms and conditions regulating the Petroleum sector are of great
importance to the whole nation as well as to all Investors in the sector, there is a need
for a clear, fair, transparent and efficient system of governance that inspires
confidence, efficiency and co-operation among all participants in the petroleum sector
be that on the authorities side (Federal, Provincial or Governate level) or among the
national and International actors;
THEREFORE .......
CHAPTER I
FUNDAMENTAL PROVISIONS
ARTICLE 1
OWNERSHIP OF PETROLEUM RESOURCES
Ownership of oil and natural gas is vested in the entire Iraqi Federal Oil and Gas
Council in all provinces and regions.
ARTICLE 2
SCOPE OF APPLICATION
A- This law applies to Petroleum Operations in all the territory of the Republic of Iraq,
including the soil and subsoil on land, as well as inland waters and territorial waters.
B- The scope of this Law excludes the refining of Petroleum, its industrial utilization
as well as the distribution and the marketing of Petroleum Products.
ARTICLE 3
PURPOSE
A- This law establishes the regime for the management of Petroleum Operations in
the Republic of Iraq, taking Into account the existing International agreements
between the Republic of Iraq and other countries on crude oil transportation.
B- The law aims to build upon existing co-operation between the relevant Ministries
in the Federal Government administration, in addition to building a base for
coordination and discussions among the federal, regional, and provincial oil
producing authorities.
ARTICLE 4
Definitions
For the purposes of this law, the following terms and expressions shall have the
meaning indicated as follows, unless the context in which used requires a different
meaning:
1- "Discovery": the first Petroleum encountered in a Reservoir by drilling that is
recoverable at the surface by conventional petroleum industry methods;
2- "Commercial Discovery": a discovery which has been deemed to be commercial
for Development purposes by the holder of Exploration and Production right;
3- region: Kurdistan region or any other regions created in Iraq after issuing this law
according to the Iraqi constitution
4- "Good Oilfield Practices" All those practices related to petroleum operations that
are generally accepted by the international petroleum industry as as good, safe,
environmentally friendly, economic and efficient In exploring for and producing
Petroleum
5- "Good Pipeline Practices" - all those practices related to transportation by pipelines
including the design, construction, commissioning, maintenance, operation and
decommissioning of pipelines that are generally accepted in the international
petroleum industry as good, safe, environmentally friendly, economic and efficient in
transporting Petroleum:
6- "Production" - the extraction and disposal of Petroleum;
7- "Petroleum" - all Crude Oil or Natural Gas, or other hydrocarbons produced or
capable of being produced from Crude Oil, Natural Gas, oil rocks or tar sands;
8- "Development": the activities carried out by the holder of Exploration and
Production right based on either the Field Development Plan or the Main Pipeline
Development Plan, which aim at Production and transportation of Petroleum;
9- "Exploration": the search for Petroleum by geological, geophysical and other
means including drilling of Exploration and appraisal wells;
10 -"Field" - An area consisting of a single Reservoir or multiple Reservoirs all
grouped on, or related to, the same individual geological structural feature or
stratigraphic condition. The field name refers to the surface area, although it may refer
to both the surface and the underground productive formations.
11- "Field Pipeline" - a pipeline, including valve stations, pump stations, compressor
stations and associated installations, collecting crude oil or natural gas from a field or
a group of fields and delivering it to a transfer point for further transportation;
12- Pipeline: an entity that consists of a linear pipeline accompanied with other
components on the ground level including stations of pumping, valves, compression,
and other accompanied accessories for gauging, supervision, telecommunications,
remote control, for the purposes of transporting crude oil and natural gas from the
transfer point to the delivery point.
13- "Main Pipeline" - The principal pipeline, including valve stations, pump stations,
compressor stations and associated installations built by the transporter, for the
transportation of crude oil or natural gas from one or several fields or sources inside
or outside Iraq;
14- "Field Development Plan" - a scheduled programme and cost estimate specifying
the appraisal and development activities required to develop and produce petroleum
from a specific field or group of fields by the holder of an exploration and production
contract, prepared in accordance with this law and the relevant provisions in the
Regulations for Petroleum Operations and the Exploration and Production Contract
covering that contract Area;
15- "Main Pipeline Development Plan" - A scheme and cost estimate specifying all
activities to be carried out by the transporter for the transportation of petroleum by
pipeline inside Iraq and across the territory of neighbouring States, prepared in
accordance with this Law, the relevant provisions in the regulations for Petroleum
Operations and the Exploration and Production Contract covering that Contract Area
and any relevant bilateral agreements.
16- "Decommissioning Plan": a scheme for the closure of Petroleum Operations and
restoration of the operating environment including the removal and disposal of all
installations;
17- "Iraqi Person"- Any citizen with Iraqi nationality or any company or institution
with legal personality established and registered pursuant to Iraqi legislation, with its
headquarters in Iraq and having at least 50% of its share capital held by national
citizens or by Iraqi public or private companies or institutions;
18- "Foreign Person" Any non-Iraqi citizen or any company or institution with legal
personality established and registered pursuant to Iraqi legislation, and , having less
than 50% of its share capital held by national citizens or by Iraqi public or private
companies or institutions;
19- "Petroleum Operations" - all or any of the activities related to Exploration,
Development, Production, separation and treatment, storage, transportation and sale
or delivery of Petroleum at the Delivery Point, Export Point or to the agreed Supply
Point inside or outside Iraq. And includes Natural Gas treatment operations and the
closure of all concluded activities;
20- "Natural Gas" - all hydrocarbons which are in a gaseous state at atmospheric
conditions of temperature and pressure, that might be associated or not with liquid
hydrocarbons, as well as the residue gas remaining after the extraction of liquid
hydrocarbons from the reservoir;
21-"Associated Natural Gas": Natural Gas which under reservoir conditions is either
in solution with liquid hydrocarbons or as gas-cap gas which overlies and Is in contact
with Crude Oil;
22- "Non-associated Natural Gas" - The free Natural Gas other than Associated
Natural Gas;
23- "Operator" -the entity designated by the Government, in consultation with the
holder of Exploration and Production right, to conduct Petroleum Operations on
behalf of the latter;
24- Producing province: any Iraqi province that produces crude oil and natural gas
continually on rates more than 150 thousand barrels a day.
25- "Reservoir" - a separate accumulation of Petroleum in a geological unit limited by
rock characteristics, structural or stratigraphic boundaries, contact surfaces between
Petroleum and water in the formation. Or a combination of these, so that Petroleum
Production from any portion of the accumulation will affect the pressure in the
accumulation as a whole;
26- "Contract Area": the area within which the holder of an Exploration and
Production right is authorized to explore for, develop and produce Petroleum;
27- "development and Production Area": a part of the Contract Area which following
a Commercial Discovery has been delineated according to the terms and conditions of
the Exploration and Production Contract;
28- "Crude Oil" - all hydrocarbons, regardless of specific gravity, which are produced
and saved from the Field in liquid state at atmospheric pressure and temperature,
including asphalt, tar and the liquid hydrocarbons known as distillates or condensates
obtained from Natural Gas within the Contract Area;
29- 'Transporter" - the entity designated by the Council of Ministers to receive Crude
Oil or Natural Gas from the holder of Exploration and Production right at the Transfer
Point and deliver Crude Oil for export or Natural Gas to the holder of Exploration and
Production right at the Delivery Point.
30- "Production Measurement Point" - the place(s) at which volumes and qualities of
Crude Oil or Natural Gas to be transferred at the Transfer Point are measured;
31- "Transfer Point" - the inlet flange(s) of the outgoing Pipelines from the
Production Measurement Point, where the Transporter shall receive Crude Oil or
Natural Gas from the holder of Exploration and Production right;
32- "Delivery Point" - the point(s) of the loading facility at which Crude Oil reaches
the inlet flange of the receiving tank-ship or such other point inside or outside Iraq, as
agreed to under the Exploration and Production Contract. In the case of Gas it Is the
flange of the inlet to the receiving installation for Natural Gas;
33- "Supply Point" - the place at which Crude Oil or Natural Gas is transferred from a
Main Pipeline or a Field Pipeline to a different type of transport, processing or use;
34- "The Ministry" - is the Ministry of Oil in the Republic of Iraq and other
companies and organizations specifically authorized by it;
35- Specialized institute: Ministry of Oil, National Iraqi Oil Company, or regional
institute
36- Regional institute: specialized ministry in the regional government.
37- Federal Oil and Gas Council: The council formed by article 5 c of this law
38- The Bureau of Independent Experts: The Bureau hired by the Federal Oil and Gas
Council in accordance to this law.
CHAPTER II: MANAGEMENT OF PETROLEUM RESOURCES
ARTICLE 5: COMP****CE OF AUTHORITIES
A. The Council of Representatives
First: shall enact all Federal legislation on crude oil and natural gas;
Second: council of representatives shall approve all international petroleum treaties
that Iraq signs with other countries that are related to petroleum operations
B. Council of Ministers
First: The council of ministers shall be responsible for recommending proposed
legislations on the development of the country's Petroleum resources for introduction
into the National Assembly.
Second: The Council of Ministers is the comp****t authority to formulate Federal
Petroleum policy and supervise its implementation. It also administers the overall
Petroleum Operations including the formulation of Federal policy on all matters
within the scope of this law including i.e. Exploration, Production, Transportation,
Marketing, the proposal of Petroleum -legislation, and the approval of such
regulations as may be necessary from time to time on the said matters.
Third: In carrying out the above functions, the Council of Ministers shall ensure that
the Ministry adopts appropriate and effective mechanisms for consultation and coordination
with the regional and producing provinces authorities in accordance to the
constitution.
C. Federal Oil and Gas Council
First: To assist the Council of Ministers in creating Petroleum policies and related
plans, arranged by the ministry in coordination with the producing provinces and
regions, and to put important legislations for exploration and production based on
ARTICLE 9 of this law the ministers council creates an entity to be named “the
Federal Oil and Gas Council”. The Prime Minister or his/her representative shall be
the president of this council, and the council should include:
1- Federal Government’s Ministers from the ministries of oil, treasury, planning, and
cooperative development.
2- The director of the Iraqi central bank
3- A regional government minister representing each region.
4- A representative from each producing province not included in a region
5- Executive managers of from important related petroleum companies including the
national Iraqi oil company and the oil marketing company
6- Three or less experts specialized in petroleum, finance, and economy to be hired
for a period not exceeding 5 years based on a resolution from the council of ministers.
The Council shall represent all the different basic components of the Iraqi people.
Second: the Federal Oil and Gas Council holds the responsibility of putting federal
petroleum policies, exploration plans, fields’ development and main pipelines plans
inside Iraq, and this council has the authority to approve any major changes in such
plans and policies.
Third: the Federal Oil and Gas Council reviews and changes the exploration and
production contracts that give the rights of petroleum operations according to
ARTICLE 10 of this law inside Iraq.
Fourth: the Federal Oil and Gas Council approves and changes the types of
exploration and production contracts prepared in accordance to the standards
mentioned in this law, and chooses the appropriate contract type for the field nature or
exploration area in a way that guarantees the maximum benefits for the Iraqi people.
Fifth: the Federal Oil and Gas Council creates the special instructions for negotiations
pertaining to granting rights or signing development and production contracts, and
setting qualification criteria for companies.
Sixth: To assist the Federal Oil and Gas Council in reviewing exploration and
production contracts and petroleum fields’ development plans, the council rely on the
assistant of a bureau called the “independent consultants’ bureau” that includes crude
oil and natural gas experts, both Iraqis foreigners, this council decides their number,
and they should be qualified and have a good reputation and long practical experience
in exploration and production operation and in petroleum contracts, and they should
be chosen by consensus of the council and contracted for a renewable one year
contract. The independent consultants’ bureau gives its recommendations and advice
to the Federal Oil and Gas Council in issues related to rights contracts, fields’
development plans, and any other related issues requested by the Federal Oil and Gas
Council.
Seventh: the Federal Oil and Gas Council is the comp****t authority to review and
approve the transfer of rights among holders of Exploration and Production right and
associated amendment of contracts provided this does not adversely affect the
national content including the percentage of national participation.
Eighth: the Federal Oil and Gas Council is responsible for ensuring that Petroleum
resources are discovered, developed, and produced in an optimal manner and in the
best interest of the people in accordance with legislation, regulations and contractual
conditions as well as recognised international standards.
Ninth: Members of the Federal Oil and Gas Council can suggest policies and law
drafts to the Federal Oil and Gas Council.
Tenth: The Federal Oil and Gas Council have the right to create any entities important
for implementing its duties
Eleventh: The Federal Oil and Gas Council have the right to create its bylaws, and the
council shall adopt its decision concerning creating petroleum policies, plans,
contracts’ models, and contracting and negotiations’ instructions based on a 2/3
majority of the members in attendance.
D. Ministry of Oil
First: The Ministry is the comp****t authority for proposing Federal policy, laws and
plans.
Second: The Ministry creates legislation as well as issuing regulations and guidelines
to implement the feral plans.
Third: The Ministry undertakes the necessary monitoring, supervisory, regulatory and
administrative actions required to ensure the proper, coordinated, and unified
implementation all over Iraq.
Fourth: On the basis of policies, regulations, guidelines and requirements under
ARTICLE 5/D/First and 5/D/Second above, and in accordance with the overall
economic and social policies of the Federal Government, the Ministry shall in
consultation with the petroleum producing provinces and regional authorities draw up
Federal policies and plans on Exploration, Development and Production on an annual
or as needed basis. Such policies and plans shall address both the short term as well as
the long term requirements. The geographical distribution and timing of actions and
projects shall comprise proposals from the Provinces and Governorates in accordance
to Appendices 1, 2, 3 and 4. The suggestions for petroleum policies and related plans
are to be submitted to the Federal Oil and Gas Council to be reviewed and approved.
Fifth: The Ministry is the comp****t authority to represent the Iraqi Republic in
regional and international forums.
Sixth: The Ministry is empowered to negotiate international and bilateral agreements
related to Oil and Gas with other countries and organizations subject to approval in
accordance with the Constitution.
Seventh: The ministry is responsible of monitoring petroleum operations to ensure
adherence with the laws, regulations, and contracting terms. In addition to its
administrative and technical monitoring duties, the ministry shall carry out
verification of costs and expenditures incurred by the holders of rights to ensure
correct and justified cost recoveries for the purpose of determining revenues accruing
to government. The ministry shall through inspection, technical audits and other
appropriate actions verify conformance with legislation, regulations, contractual terms
and internationally recognised practices. The ministry must coordinate with regions’
governments and producing provinces to create specialized entities that carry out the
ministry’s responsibilities.
Eighth: The Ministry has the right to execute contracts related to Oil and gas supply
services other than Exploration and Production Contracts and in other applicable
legislation.
E. Iraqi National Oil Company
First: The Iraqi National Oil Company (INOC), in accordance with ARTICLE 6 of
this law, can participate in exploration and production operations inside Iraq on behalf
of the Iraqi government. INOC is obligated to sell its share of crude oil to the Oil
Marketing Company based on the delivery price that covers the cost in addition to a
reasonable profit that would facilitate the company’s development in exploration and
production.
Second: The tasks and scope of operation of INOC shall include carrying out Oil and
Gas Exploration, Development, Production, Transportation, Storage, Marketing and
sales down to the Delivery Point in accordance with the rights and obligations under
this Jaw including the necessary contracts, permits and approvals applicable to all
other holders of rights.
Third: INOC shall have the right to participate as a commercial partner in
international projects related to the transportation, marketing and sale of Oil and Gas.
It may also participate in Exploration and Production contracts outside the Republic
of Iraq subject to approval by the Council of Ministers.
Fourth: INOC shall form fully owned Subsidiary companies in selected areas in Iraq
based on the location of fields, size of petroleum reserves, production capacity and
cost benefit analysis, or based on rearrangements and task management of existing
companies based on its work capacity leading to better efficiency based on
appropriate bylaws and procedures to be issued for the purpose.
Fifth: INOC shall have the right to establish in association with others affiliated
companies or acquire shares in existing companies inside the Republic of Iraq. INOC
may also undertake the same outside the Republic of Iraq subject to the approval of
the Council of ministers.
Sixth: INOG shall have the right to acquire tangible and intangible assets belonging to
natural or legal entities for the purpose of achieving its objectives and in accordance
with the law.
F. Provincial Authorities
The provincial authorities shall have the following comp****cies:
First: The Province authorities shall undertake the necessary preparations in order to
propose to the Federal authorities activities and plans on behalf of the Province to be
included in the Federal plans for Petroleum Operations. It shall further assist the
Federal authorities in discussions leading to the finalisation of the Federal plan as
required.
Second: Participate in the licensing process regarding activities within its respective
province related to exploration and production of discovered but undeveloped fields
mentioned in appendix number 3 according to mechanisms motioned in ARTICLE 9
with the participation of a representative from the Ministry and based on contracting
types prepared by the Federal Oil and Gas Council and in accordance to regulations
issued by Federal Oil and Gas Council with qualified international oil companies
adherent to the bases put by the Federal Oil and Gas Council.
Third: Be represented in discussions carried out by the Oil and Gas Commission In
accordance with ARTICLE 5 of this law.
Fourth: Collaborate with the Ministry to undertake the monitoring and supervision of
Petroleum Operations to ensure adherence to legislation, regulations, guidelines and
the specific terms of the relevant Exploration and Production Contracts. Such
functions shall be carried out in close coordination and harmonisation with the
Ministry to ensure uniform and consistent implementation throughout the Republic of
Iraq.
ARTICLE 6
Iraqi National Oil Company
A- The Iraqi National Oil Company (INOC) a holding company fully owned by the
Iraqi Government and based in Baghdad. INOC is financially and administratively
independent and is based on commercial bases.
B- Its scope of operations shall include:
First: Managing and operating existing producing fields mentioned in appendix 1, and
both the North Oil Company and the South Oil Company are linked to it.
Second: Participation in the Development and Production of discovered and yet not
developed fields mentioned in appendix 2.
Third: Carrying out for Exploration and Production operations in new areas outside its
respective areas in adherent to this law through applying for Exploration and
Production rights in the new areas based on competition.
Fourth: INOC shall also own, manage and operate the Main oil and Gas Pipeline
network and the export ports in the Republic of Iraq and enter into contracts with
existing and future shippers of oil and Gas in accordance with this law. The company
continues its responsibilities in operating the Main oil and Gas Pipeline network and
the export ports in Iraq during a transitional period not exceeding two years until
rearranging the ministry of oil companies. Then, the Federal oil and gas Council
decides the entity responsible of operating the Main oil and Gas Pipeline network and
the export ports in Iraq based on a proposal submitted by the ministry after
coordinating with the INOC in adherent to this law and after the approval of the
ministers council.
Fifth: To ensure and develop the coordination and collaboration with regions and
producing provinces, the INOC establishes subsidiary companies which it owns in
total and which will control the petroleum operations in the regions and producing
provinces; these subsidiary companies will be represented on the INOC board and
will be paid for the cost they incur in addition to a specific reasonable profit in order
that they can develop and enhance their operations
Sixth: The board of the INOC oversees the INOC and its subsidiary companies; in
accordance to the INOC law, the board includes members from the federal
government, the regions, and the producing provinces
Operation 7
Ministry of Oil
A- The ministry, according to law, must create the important institutional and
methodology changes to cope with its new responsibilities and duties. In particular,
the ministry has to create a new department as soon as possible specialized in
planning, developing, and following up the process of obtaining rights. This new
department must consist of members of the ministry trained and specialized in
operating bids and auctions and conduct professional negotiations with oil companies
to sign contracts of exploration and production rights in adherent to the ministry’s
authorities and in accordance to ARTICLE number 9 of this law. In addition, this
department must include in each and every negotiations representatives from the
related producing provinces. It is permissible that the negotiation and rights teams
include expert advisers with a distinguished international reputation and experience.
B- The law of rearrangement the ministry of oil must include the suggested
mechanisms that will be the basis of re-structuring the relationship between the
ministry and other related companies and regulating entities in a way that guarantees a
full separation between on the one hand the production companies and oil services
and on the other hand the regulatory, monitory, supervisory, departments in the
ministry. In addition, the production departments must be separated yet integrated
from the services departments in a way that guarantees increasing productivity and
maximizing profits.
ARTICLE 8
Fields development and oil and gas exploration
A- Regarding the priorities aimed at restoring and increasing production related to
existing fields, the INOC is the operator and is authorized to directly sign services
contracts or administrative contracts with appropriate oil or services companies, in
case this was needed to accelerate reaching to the goals stated in the ARTICLE.
B- The ministry, and after coordinating with regions and producing provinces, and in
adherence to ARTICLE 9 of this law, is to propose to the Federal oil and gas Council
the best methods to develop the discovered but yet not developed fields.
C- The ministry prepares model exploration and production contracts to be approved
by the Federal Oil and Gas Council and to be appended to this law. These model
contracts must guarantee the best levels of coordination between the oil ministry,
INOC, and the regions each according to their specific responsibility in relation to
both this law and the international oil companies.
D- The utmost efforts must be put into insuring speedy and efficient development of
the fields discovered but partially or entirely not yet developed when this law is
enacted, and it is permissible to develop these fields in collaboration with reputable
oil companies that have the efficient financial, administrative, technical, operational
capabilities according to the contracting terms and the regulations issued by the
Federal Oil and Gas Council.
E- The Federal oil and gas Council, the oil ministry, INOC, and the regional entities
have to carry out an exploratory program in Iraq to asses the oil and gas assists,
compensate production, and add new reserves.
F- The ministry must provide the federal oil and gas council with a comprehensive
proposal for oil and gas exploration throughout the Republic of Iraq in coordination
with the regions and the producing provinces, sorting out the areas according to their
oil and gas potentials, implemented within a short time table in order to guarantee
increasing reserves and continuing and developing production
ARTICLE 9
GRANT OF RIGHTS
A- The rights for conducting Petroleum Operations shall be granted on the basis of an
Exploration and Production contract between the Ministry or the regional entity and
an Iraqi or Foreign Person, natural or legal, which has demonstrated to the Ministry or
to the regional entity the technical comp****ce and financial capability that are
adequate for the efficient conduct of Petroleum Operations according to what the
Federal oil and gas Council and mentioned in ARTICLE 5/C/Fifth, and in accordance
to the mechanisms of negotiations and contracting mentioned in ARTICLE 10 of this
law.
B- The licensing process shall be based on transparent and accountable tendering and
shall take into account recognised practices by the international petroleum industry. It
shall adhere to the following principles and procedures:
First: Competitive licensing rounds based on clearly defined terms and terms of
application as well as the criteria to be used in the selection of successful candidates.
Second: The contractual terms offered to applicants shall be specified in model
contracts accompanying the letter of invitation.
Third: The form and terms of the model contract shall take account of the specific
characteristics and requirements of the individual area, field or prospect being offered,
including whether the resources are discovered or not, the risks and potential rewards
associated with the investments under consideration, and the technological and
operational challenges presented.
Fourth: All model contracts shall be formulated to honour the following objectives
and criteria:
1- National control,
2- Ownership of the resources,
3- Optimum economic rent to the country,
4- An appropriate return on investment to the Investor,
5- Reasonable incentives to the investor for ensuring solutions which are optimal to
the country in the long-term related to:
a- Improved and enhanced recovery,
b- Technology transfer.
c- Training and development of Iraqi personnel,
d- Optimal utilisation of the Infrastructure,
e- Environmentally friendly solutions and plans.
Fifth: The Model Contracts may be based upon Service Contract, exploration risk
contract, or exploration and production contract provided they are adapted to best
meet the objectives and criteria under 9/b above which serve the best interest of the
Republic of Iraq.
Sixth: Only pre-qualified companies by the ministry or the regional entity shall be
considered in any licensing round. The criteria for prequalification shall be specified
in the Invitation to bidding according to the regulation and instructions put by the
Federal oil and gas Council.
Seventh: Evaluation of pre-qualified applicants shall aim at establishing a short list of
successful candidates for negotiations.
Eighth: The selection and ranking of successful applicants shall be on the basis of the
quality and relevance of the proposed work plan and the anticipated economic rent to
the nation.
Ninth: The overall allocation of Exploration and Production rights throughout the
Republic of Iraq shall aim at achieving variety among oil companies and operators
with different background, expertise, experience and approach so as to enhance
efficiency through positive competition, benchmarking of performance and
transparency. The possibility of using consortia of selected companies, particularly in
large fields, should be considered.
Tenth: Not later than two months after the endorsement of approval of Exploration
and Production contracts
C- The granting of rights for the activities referred to in ARTICLE 9/A shall always
respect national interests, including but not restricted to those related to defence,
navigation, research and development, conservation, health and safety and a high
level of environmental protection.
d- The Ministry is to regulate the form and manner in which rights are granted under
this ARTICLE in a manner consistent with this law and the regulations of the Federal
Oil and Gas Council.
ARTICLE 10
Mechanisms of Negotiations and contracting
A- The Ministry, the INOC, or the regional entity, based on their respective
specialties and responsibilities, and after completing initial procedures for granting
rights as indicated in ARTICLE 9, there will be an initial signing of exploration and
production contracts with the selected contractor
B- The exploration and production contracts mentioned in ARTICLE 10/A must
include the following: “the contract is valid unless it the Federal Oil and Gas Council
objects, in accordance to this law (number …. Of 2007). This includes the
negotiations and contracting mechanisms, contracting models, and any related future
changes in this concern issued by the federal oil and gas council”
C- The initial contract mentioned in ARTICLE 10-B must be submitted to the federal
oil and gas council within thirty days from the day of the initial signing or it will be
considered cancelled
D- The federal oil and gas council must adhere to the following steps when deciding
on the contracts submitted to it by Ministry, INOC, or the regions:
First: Submitting the initial contract mentioned in ARTICLE 10/C, if the Federal Oil
and Gas Council finds it advisable, to the independent consultants bureau for analysis
who will provide their opinion and assess whether the contract adheres to the model
contracts approved by the Federal Oil and Law Council and to its regulations
pertaining to exploration and production rights in accordance to ARTICLE 9
Second: In case the initial contract has serious discrepancies as compared to the
model contracts and regulations approved by the Federal Oil and Gas Council, the
Federal Oil and Gas Council will make a decision on the contract based on the
recommendations of the independent consultants bureau; the decision requires a 2/3
majority of the members in attendance.
Third: The Ministry, INOC, or the regional entity must be informed of the rejections
of the initial contract in accordance to the legal reasons within (60) sixty days of
receipt of the initial contract by the Federal oil and gas Council, and the contract is to
be considered approved in case no decision was made by the Federal Oil and Gas
Council within the mentioned period. In case the Federal Oil and Gas Council could
not hold a meeting within 60 days of receiving the initial contract due to extraordinary
reasons, the council must take a decision regarding the contract within the second (45)
forty five days using all the possible means, and the contract will be considered
approved in case no decision was made by the Federal Oil and Gas Council within the
mentioned period.
C- The Ministry, INOC, or the regional entity must fix the reasons behind the
rejection of the Federal Oil and Gas Council trough changing the initial contract in the
necessary way to get approved and submit it again according to the regulations
mentioned in this ARTICLE.
ARTICLE 11
Petroleum revenue
A- According to the constitution (articles 106, 111, 112, 121 third) regarding the
ownership of the oil and gas resources, the distribution of its revenues, and
monitoring the federal revenue distribution, the ministers council must submit a
federal law draft to the representatives council regulating these matters in adherence
to the sections of this article.
B- The oil revenues include all the government revenues from oil and gas, royalties,
signing rewards and production rewards of petroleum contracts with foreign or local
companies.
C- The revenues mentioned in article 11/A must be deposited in an account called
“the oil revenue treasury” specifically for this reason. The Federal Financial Revenues
Law shall create the mechanisms of managing this treasury and distributing it in a just
way in accordance to the constitution.
D- Another treasury must be created under the name “The Future Treasury”, and a
certain ratio of oil revenue must be deposited in this treasury regulated by the law.
ARTICLE 12
PARTICIPATION OF THE STATE
A- The Republic of Iraq shall aim at achieving substantial national participation in the
management and Development of its Petroleum resources in adherence to Article 111
of the constitution.
B- The Exploration and Production rights with regard to existing producing fields are
hereby given to the INOC. The formal granting of additional Exploration and
Production rights to INOC regarding not yet developed Fields shall be affected by the
Federal Oil and Gas Council in accordance to article 6 and appendix 2 of this law.
C-The Main Pipeline network inside Iraqi territories is hereby assigned INOC or any
specialized companies created by the ministry. The formal procedure for this
assignment and necessary approvals shall be affected by the Federal Oil and Gas
Council in accordance with article 21 this Law.
D- The Republic of Iraq reserves the right to participate in Petroleum Operations on in
any phase of Petroleum Operations on terms and conditions that are established by
contract.
E- The Federal Oil and Gas Council is authorised to designate INOC to exercise the
Republic of Iraq's participation share in accordance with Article 5/C of this law.
CHAPTER 3
FIELDS EXPLORATION AND DEVELOPMENT ACTIVATES
ARTICLE 13
EXPLORATION AND PRODUCTION CONTRACT
A- An Exploration and Production Contract shall give the holder an exclusive right to
conduct Petroleum Exploration and Production in the Contract Area. In addition, the
contract shall give the holder the right of transportation in accordance with ARTICLE
21/A of this law.
B- Except if additional time is needed to complete the operations to assess a
Discovery, the exclusive Exploration and Production right shall be granted as follows:
1- A First Period shall be a maximum of four years.
2- Subject to having fulfilled all commitments by the holder, the specialized entity
may grant a Second Period of two years provided however that a substantial work
programme is committed to under this period.
C- A Third Period of Exploration can for special considerations of continuity be
granted by the specialized entity provided however that such extension is justified by
the quality and substance of the work programme and does not exceed two years.
D- All extensions shall be subject to the provisions concerning the relinquishment of
Contract Areas in adherent to the petroleum regulations.
E- In the event of a Discovery, the exclusive Exploration and Production right may be
retained by the holder for the purposes of completing the operations initiated within a
specified area to assess or determine the commercial value of a Discovery for an
additional period of two years or, in the case of a non-associated Natural Gas
Discovery, for an additional period not to exceed four years.
F- On the basis of a Field Development Plan prepared and approved in accordance
with this law and the relevant contract, INOC and other holders of an Exploration and
Production right may retain the exclusive right to develop and produce Petroleum
within the limits of a Development and Production Area for a period to be determined
by the Federal Oil and Gas Council not exceeding 20 years dating from the date of
approval of the Field Development Plan, depending on considerations related to
optimal oil recovery and utilisation of existing infrastructure. In cases which for
technical and economic considerations warrant longer Production period, the Council
of Ministers, on newly negotiated terms, has the authority to grant an extension not
exceeding 5 years. The remaining acreage outside the Development and Production
Area shall be relinquished at the end of the Exploration and Production right.
G- The appointment of an Operator shall be approved by the specialized entity in
accordance to the appointment procedures mentioned in the Initial Contract and based
on the terms and conditions issued by the Oil and Gas Council. The operator’s must
me mentioned in the initial contract.
ARTICLE 14
OBLIGATIONS OF THE
HOLDERS OF EXPLORATION AND PRODUCTION RIGHT
A holder of Exploration and Production right is obliged, mutatis mutandis, to:
A- Conduct Petroleum Operations in accordance with the terms of this law, the
Regulations for Petroleum Operations as well as other applicable legislation and Good
Oil Field Practices;
B- Promptly report any Discovery within the Contract Area to the Ministry;
C- Conduct the necessary delineation and evaluation of the Discovery with a view to
determining its commercial potential and keep the Ministry fully informed of progress
and results;
D- In the event of a Commercial Discovery, prepare and submit to the specialized
entity, in accordance with the Regulations for Petroleum Operations, a Field
Development Plan for the Discovery:
E- Prepare and submit a revised Field Development Plan for any material amendment
to the original Plan for approval by the specialized entity
F- Implement the Field Development Plan or the revisions thereto once these have
been approved by the specialized entity;
G- Submit a Decommissioning Plan to the Ministry, not later than two years before
the planned termination of Production;
H- Compensate the Injured parties for any losses or damages resulting from the
conduct of the Petroleum Operations as provided by law;
I- When the national Interest so requires, give preference to the Ministry in the
acquisition of Petroleum produced in the Contract Area, and access to pipeline
transportation, in accordance with terms and conditions to be agreed upon with the
Ministry;
J- Provide the greatest possible support for required research and development
activities in connection with Petroleum Operations and endeavour to carry out as
much of these activities by Iraqi institutions;
K- Collect, organise and maintain in good condition usable data from all phases and
on all aspects of Petroleum Operations in accordance with this Law and with
Petroleum regulations, and
L- At no cost, supply the Ministry and affiliated companies, with, all data collected
and assembled from Petroleum Operations, in accordance with ARTICLE 19 of this
Law.
ARTICLE 15
COMP****CE BUILDING AND LOCAL CONTENT
A- The Republic of Iraq aims at the development of a comp****t and effective Iraqi
private sector capable of substantial participation in Petroleum Operations including
the acquisition, alone or together with international companies, of Exploration and
Production rights. Such development shall however adhere to the objectives of
professional comp****ce in accordance with this law. Towards this end holders of
Exploration rights are encouraged to pursue cooperation and association with serious
and qualified Iraqi private Initiatives.
B- INOC and other holders of Exploration and Production rights shall give preference
to the purchase of Iraqi products and services whenever they are competitive in terms
of price, comparable in terms of quality and available on a timely basis in the quantity
required.
C- INOC and other holders of Exploration and Production rights shall to the
maximum reasonable extent undertake to employ Iraqi citizens having appropriate
qualifications and shall undertake to train and prepare potential candidates towards
this objective.
D- INOC and other holders of Exploration and Production rights shall maximise to
the greatest reasonable extent, training and technology transfer opportunities for Iraqi
nationals, at all levels of Petroleum Operations including management.
E- INOC and other holders of Exploration and Production rights are required to
diligently seek and develop associations, affiliations, joint ventures and other forms of
partnership and or co-operation in order to promote the rapid growth of an Iraqi
private sector capable of assisting and enhancing Petroleum Operations to the mutual
benefit of the said holders and the nation.
ARTICLE 11
UNITISATION
A- A Petroleum Discovery which is located partly in one Contract Area and partly in
another Contract Area shall be developed and operated jointly pursuant to a
unitization agreement which shall be submitted for approval by the Federal Oil and
Gas Council to be approved. Should the right-holders fail to reach agreement on the
modalities of unitisation, the Federal Oil and Gas Council has the right to decide on
the terms six months after serving notice to the parties to this effect.
B- A Petroleum Discovery which extends from areas authorized for Production into
areas not authorized for Production shall be developed only after consultation with the
Federal Oil and Gas Council about the measures necessary to protect the interests of
the Republic of Iraq.
C- The Council of Ministers shall adopt the necessary measures to protect the
interests of the Republic of Iraq in Petroleum Discoveries extending beyond the
borders of the Republic. In such cases efforts shall be made to seek joint solutions
with the said neighbouring countries.
ARTICLE 17
CONSERVATION
A- The extraction of Petroleum resources shall aim at the avoidance of waste,
including preventing leakages from Pipelines, and the optimal maintenance of energy
in the Reservoir in accordance with Good Oilfield Practices and Good Pipeline
Practices.
B- INOC and other holders of an Exploration and Production right shall diligently
apply the latest technologies and oilfield practices that lead to optimum recovery from
the individual Reservoir or a group of Reservoirs that are targeted under the Field
Development Plan(s).
C- The Field Development Plan shall be based on thorough investigations of
alternative extraction strategies in order to select a solution that combines the highest
level of Petroleum recovery with acceptably high levels of Production and as low cost
as possible.
D- Subsequent to the approval of a Field Development Plan, INOC and other holders
of Exploration and Production right shall continue to improve Reservoir
understanding through optimal data collection and Reservoir monitoring and shall
accordingly seek to identify and implement actions that would Improve Petroleum
recovery.
ARTICLE 13
ACCESS TO MAIN PIPELINES AND FIELD PIPELINES
A- The Main Pipelines are the property of the federal government.
B- INOC as the Transporter with respect to Main Pipelines and the holder of
Exploration and Production right under ARTICLE 17/A with respect to Field
Pipelines have the obligation to transport, without any discrimination and on
reasonable commercial terms, the Petroleum of third parties, provided in general that:
1- Capacity is available in the Field Pipeline;
2- There are no insurmountable technical problems that prevent such utilisation of the
Field Pipeline.
C- Details shall be provided for the modalities of the system of access by third parties
to Field Pipelines in regulations to be made by the Ministry in coordination with the
regions and producing provinces.
D- Whenever there is a dispute concerning the commercially reasonable terms for the
transport of Petroleum in a Main Pipeline or a Field Pipeline for Oil or for Natural
Gas, the availability of uncommitted capacity in the pipeline in question or a proposed
increase of its capacity, the dispute shall be first referred to the Ministry for resolution,
the ministry must work in coordination with regions and producing provinces.
Thereafter, resolution shall be sought according to the procedures set out in
ARTICLE 30 of this Law.
ARTICLE 19
OWNERSHIP OF DATA
A- All data obtained pursuant to any Contract provided for under this Law is the
property of the Iraqi Government, and shall not be published, reproduced or exported
without the prior approval of the Ministry.
B- The terms and conditions for the exercise of rights in respect of primary,
differentiated, processes, interpreted and analysed data related to oil and gas in Iraq
including but not limited to geological and geophysical reports, engineering data,
samples, logs and well surveys, shall be established in data supply obligations in the
relevant contract and by regulations.
C- The Ministry submits copies of the current available petroleum data to the INOC
and to the regions, and the INOC and regions must take the responsibility of
supplying the Ministry with new data and updates resulted from the petroleum
operations implemented by them in a continues and periodic fashion.
D- Anyone who has the information in his possession or sells, buys, transfers,
receives, deals with any of the information or data mentioned in this article shall be
considered in violation, unless the contract terms states otherwise, and shall be
prosecuted under the Iraqi criminal and civil law. No one has the right to own such
data and information.
E- Without prejudice to section D of this article, it is allowed for someone to have a
permission from the specialized entities to own, buy, sell, transfer, or receive data and
information indicated in section F of this article under the condition of supplying the
specialized entities with copies of the data, and his permission should not be revoked
without logical reasons.
F- Old Data, for the purposes of this law, mean all primary, differentiated, processes,
interpreted and analysed data and information related to oil and gas in the republic of
Iraq indicated in section B of this article.
ARTICLE 20
RESTRICTIONS ON PRODUCTION LEVELS
In the event that, for national policy considerations, there is a need to introduce
limitations on the national level of Petroleum Production, such limitations shall be
applied in a fair and equitable manner and on a pro-rata basis for each Contract Area
on the basis of approved Field Development Plans.
CHAPTER IV
TRANSPORTATION
ARTICLE 21
MAIN PIPELINES
A- INOC, or the specialized company created by the Ministry, shall own all Main
Pipelines. Such Pipelines shall be constructed and operated by the INOC subsidiary
representing Transporter for the purpose of transporting Oil or Natural Gas to
specified Delivery Points for Oil and Natural Gas respectively. The Ministry in coordination
with INOC and in consultation with Operators shall ensure that the Main
Pipeline network is optimally designed, operated and maintained so as to serve the
overall requirement for Petroleum transportation in the Republic of Iraq.
B- The construction and operation of Main Pipeline or any major modification thereof
shall be subject to approval by the Ministry on the basis of a Main Pipeline
Development Plan outlining the proposed work. If the proposed work is undertaken
by the specialized company representing Transporter in association with Iraqi or
Foreign Persons, the agreement between' the parties shall accompany the Main
Pipeline Development Plan. Such agreement shall outline the terms of financing,
implementation, and the modalities of utilisation and operation of the new or modified
Main Pipeline.
C- INOC and other holders of Exploration and Production right shall deliver Oil and
Natural Gas to the Main Pipeline at appropriate Transfer Point(s) In accordance with
ARTICLE 13/A. The transportation of Crude Oil or Natural Gas beyond the Transfer
Point shall be carried out by the specialized company representing Transporter on the
basis of a contract.
D- All the above activities shall be carried out in accordance with Good Pipeline
Practices.
E- The co-ordination of tasks related to the transport of Crude Oil through new
Pipelines outside the Iraqi territories is the responsibility of the Ministry. The Follow
up of operations subsequent to the approval of the necessary bilateral agreements shall
be the responsibility of INOC in accordance with the said bilateral agreements and
any specific instructions from the Ministry.
ARTICLE 22
RIGHTS AND OBLIGATIONS REGARDING PIPELINES
A- The Exploration and Production Contract shall provide a non-exclusive right to
access Main Pipelines on reasonable commercial terms. It shall also confer the right to
construct and operate Field Pipelines to deliver Oil or Natural Gas from the Contract
Area to the Transfer Point, for further transportation through the Main Pipeline to the
Delivery Point.
B- INOC and of her holders of Exploration and Production right shall Implement the
Field Development Plan and construct Field Pipelines connected to the Main Pipeline
or the modifications thereto following approval of such plans have been approved by
the Ministry;
C- INOC and other holders of Exploration and Production right shall prepare and
submit a revised Field Pipeline Development Plan for any material amendment to the
original Plan for approval by the Ministry;
D- INOC and other holders of Exploration and Production right shall negotiate with
INOC or the specialized company as the Transporter for the right to use the Main
Pipeline. The Ministry Is to be kept informed on the progress of these negotiations;
E- INOC and other holders of Exploration and Production right shall submit a
Decommissioning Plan to the Ministry, not later than two years before the planned
termination of Production;
CHAPTER V
NATURAL GAS
ARTICLE 23
GAS UTILISATION
A- Natural Gas is a valuable Petroleum resource of increasing importance in the
economic development of the Republic of Iraq and the Middle East. It shall be utilised
to generate additional revenues through optimal utilisation partly through improving
oil recoveries by gas injection into suitable Reservoirs; through utilisation for power
generation, utilisation in petrochemical and chemical industries, utilisation for
domestic purposes, utilisation in Industrial processes, utilisation for export and/or
through the replacement of fluid fuels. The latter will have the additional benefit of
reducing the impact on the environment while at the same time maximising revenue
by freeing more crude and fuel oil for export.
B- INOC and other holders of Exploration and Production rights shall diligently
pursue all alternatives for optimal utilisation of surplus volumes of produced gases in
accordance with the objectives of ARTICLE 23/B above. Should they fail to identify
commercial utilisation, the volumes of surplus Natural Gas shall be offered after
treatment to Government at no cost at the Field's outlet. The cost incurred by the
holder of Exploration and Production rights shall be recoverable under the respective
contract.
ARTICLE 24
ASSOCIATED GAS
A- INOC and other holders of Exploration and Production right are entitled to use,
free of charge, the quantity of Associated Natural Gas necessary for Petroleum
Operations.
B- INOC and other holders of Exploration and Production right shall in the Field
Development Plan propose optimal plans for the utilization or disposal of Associated
Natural Gas.
C- All Associated Natural Gas produced from a Reservoir which is neither used in
Petroleum Operations, utilised or re-injected in the Field, shall be offered for delivery
free of charge to the Ministry in accordance with ARTICLE 23/B above.
ARTICLE 25
FLARING OF NATURAL GAS
A- Flaring of Natural Gas is only permitted for the purposes of commissioning,
testing of installations, safety precautions or while awaiting the completion of
transportation facilities provided the flared volumes are strictly kept to a minimum
and the Ministry is promptly notified.
B- The flaring of Associated Natural Gas shall be kept to a minimum. It shall not be
permitted beyond a maximum period of one year during which measures shall be
completed to utilise the gas or deliver it to a nominated government entity in
accordance with ARTICLE 23/B above
ARTICLE 26
NON-ASSOCIATED GAS
A- The Development and Production of Natural Gas or liquid components thereof
from a Non-associated Natural Gas Discovery shall be subject to the approval of the
Ministry of a Field Development Plan supported by signed agreement(s) for the sale
of Natural Gas from the Discovery and approved by the Council of Ministers. In the
event that only liquid Petroleum is to be produced, a scheme for the re-injection of
Natural Gas or other acceptable schemes for its disposal shall be presented in the
Field Development Plan.
B- The flaring of Non-associated Natural Gas may only be permitted in accordance
with ARTICLE 25/B.
CHAPTER VI
REGULATORY MATTERS
ARTICLE 27
REGULATIONS FOR PETROLEUM OPERATIONS
The Ministry, in coordination and collaboration with the INOC, regions, and
producing provinces, shall approve regulations for Petroleum Operations and submit
it to the Federal Oil and Gas Council to be approved.
ARTICLE 28
USE AND BENEFIT OF LAND AND RIGHTS OF WAY
A- Land use and benefit for the purpose of conducting Petroleum Operations is
regulated by the legislation on land use and benefit, without prejudice to the following
provisions.
B- For the purpose of conducting Petroleum Operations, the duration of the right of
use and benefit of the land shall be the same as the duration of the Contract.
C- The land where installations are located, and a strip of land, to be defined by
regulation, surrounding those Installations, are considered to be a zone of partial
protection in accordance with the legislation on land use and benefit.
D- INOC and other holders of a right to conduct Petroleum Operations who, by virtue
of the exercise of Petroleum Operation rights in the Contract Area, causes damage to
crops, soils, building and improvements or requires the relocation of the legal users or
occupants of the land within the respective Contract Area, has the obligation to
compensate the holders of title to the assets and the persons relocated.
E- Subject to the payment of the compensation that are due, the holder of the right to
conduct Petroleum Operations may require the right of way in accordance with the
legislation in force, in order to have access to the locations where Petroleum
Operations are conducted.
F- In cases where lands and rights of way are owned by an Iraqi Person, the land shall
be either rented or bought by the relevant state owned company, according to the
applicable laws and regulations.
ARTICLE 29
ACCESS TO ZONES SUBJECT TO MARITIME JURISDICTION
The access to Petroleum Operations sites located in interior waters, the territorial
waters, and other zones subject to maritime jurisdiction is regulated by law, and any
relevant international agreements.
ARTICLE 30
INSPECTION
A- The Specialized Entity, or its authorized representatives, has the right to inspect
sites, including buildings and installations, where Petroleum Operations are being
conducted, as well as all assets, records and data kept by INOC and other holders of
Exploration and Production right relating to Petroleum Operations.
B- The Specialized Entity may designate an independent entity or a commission
created for this purpose, to any out the inspection.
C- The terms and conditions pursuant to which the Inspection is carried out shall be
established by regulations.
D- In carrying out its inspections, the Specialized Entity shall not unreasonably
interfere with the Petroleum Operations.
ARTICLE 31
ENVIRONMENTAL PROTECTION AND SAFETY
In addition to carrying out their Operations in accordance with Good Oil Field
Practices, INOC and other holders of Exploration and Production rights shall conduct
Petroleum Operations in accordance with environmental and other applicable
legislation of the Republic of Iraq to prevent pollution of air, lands and waters. They
shall also conduct Petroleum Operations so as to comply with the environmental
management standards of the ISO 14000 series, as amended. In general, they shall
carry out Petroleum Operations in order to:
1- Ensure that there is no ecological damage or destruction caused by Petroleum
Operations, but where unavoidable, ensure that measures for protection of the
environment are in accordance with internationally acceptable standards. For this
purpose, INOC and other holders of a right shall prepare and submit to the relevant
authorities for approval an environmental impact assessment, including environmental
impact mitigation measures, for each major operation in the Contract Area;
2- Notify the Ministry and other specified authorities immediately in the event of an
emergency or accident affecting the environment;
3- Control the flow and prevent the escape or loss of Petroleum discovered or
produced within the Contract Area;
4- Avoid damage to Petroleum Reservoirs;
5- Avoid destruction to land, the water table, trees, crops, buildings or other
Infrastructure and goods;
6- Clean up the sites after the closure of Petroleum Operations and comply with the
environmental resolution requirements;
7- Ensure the health and safety of personnel in the planning and conduct of Petroleum
Operations, and take preventive measures if their physical safety would be at risk;
8- Report to the comp****t entity within the government on the amounts of
operational and accidental discharge, leakage and waste resulting from Petroleum
Operations, and
9- Provide compensation for damages to State and private property in accordance with
the applicable laws and regulations.
B- INOC and other holders of a right under this Law shall act in a secure and effective
manner when conducting Petroleum Operations In order to guarantee the disposal of
polluted water and waste oil in accordance with approved methods, as well as the safe
plugging of all boreholes and wells before these are abandoned.
ARTICLE 32
TRANSFER OF OWNERSHIP AND DECOMMISSIONING
A- On completion of the Exploration and Production Contract or Main Pipeline
Contract the ownership of all works and facilities shall be transferred to Specialized
Entity. The properties shall be transferred to the relevant federal state enterprise or to
the Ministry in actual operating condition and in a satisfactory state of work at the
time of the transfer.
B- All site relinquishment and related costs that become due at the time of transfer
with regards to any works and facilities shall be payable by INOC and other holders
of Exploration and Production right according to a Decommissioning Plan, submitted
in accordance with ARTICLE 9/F [sic] of this Law.
C- An outline Decommissioning Plan shall be included In the Field Development Plan
submitted by the Contractor to the Council of Ministers.
CHAPTER VII
FISCAL REGIME
ARTICLE 33
GENERAL PRINCIPLES OF TAXATION
A- INOC and its subsidiary companies as well as other Individual and collective
persons who are holders of a right to conduct Petroleum Operations are, subject to the
payment of the following fiscal impositions:
1- Royalty;
2- Property Contribution and the Property Transfer Tax (SISA) as established in
accordance with the law;
3- Municipal and local taxes due;
4- The taxes provided for in the Income Tax Code;
5- Customs.
B- All oil companies working in Iraq shall be supervised by the Commission of
Financial Audit in matters related to its operations in Iraq.
C- A Foreign Person may repatriate its exports proceeds in accordance with the
foreign exchange regulations in force at the time. It may freely transfer shares in
accordance to article 5/c/seventh.
ARTICLE 34
ROYALTY
A- INOC and other holders of an Exploration and Production right shall pay a royalty
on Petroleum produced from the Development and Production Area, at the rate of
12.5% of Gross Production measured at the entry flange to the Main Pipeline.
B- The collection of Royalty shall be in kind or in cash at the option of the Ministry.
C- Where the royalty is paid in cash, it shall be calculated according to the prevailing
Market Price in accordance with Petroleum Regulations.
ARTICLE 35
Maintaining Records
A- Holders of Exploration and Production right can transfer any net profits from
petroleum operations to outside Iraq after paying taxes and fees owed.
B- INOC and other holders of Exploration and Production right shall maintain proper
records and books in Arabic of accounts in accordance with the provisions of the
Contract enabling the relevant calculations to be performed, and in compliance with
the requirements of the laws relevant to the taxes referred to in ARTICLE 33. INOC
and other holders shall prepare and submit to the specialised entity annually, or
quarterly, a statement of accounts.
CHAPTER VIII
MISCELLANEOUS PROVISIONS
ARTICLE 36
Transparency
A- All activities related to oil and gas, while occurring, have to be transparent and
responsible. To ensure this transparency and give the Iraqi people the chance to hold
governmental entities responsible for their activities and actions, different sorts of
information must be published. This information includes but is not limited to the
following:
1- All the revenues, payments and receipts that are delivered to any governmental unit,
or entity run by the government, from activities related to oil or gas. This includes but
is not limited to the income of selling oil, gas and their products, signing and
production rewards, royalties, revenue of selling assets, taxes, fees, customs and taxes,
public services fees, share of profits from oil and gas cartels, commercial activates
related to oil and gas (and their products) contracts, oil and gas revenue investment
yield, and any other payments resulted from or related to commercial production of
hydrocarbons.
2- The revenues of oil and gas usage and distribution, including distribution among
governmental entities.
3- All of the financially significant contracts related to exploration, development,
processing and marketing of oil and gas resources in Iraq
4- All of the financially significant contracts related to importing or exporting services
and goods for the oil and gas industry or by any governmental unit or entity controlled
by the government
5- The annual report of the Federal Oil and Gas Council
6-The annual and quarterly reports of the INOC, the subsidiary companies, and the
entities controlled by the government including the budgets audited according to
international accounting standards
7- All other information necessary for understanding the operations and activities
carried out by any governmental unit or entities controlled by the government related
to oil and gas
8- Any information that must be declared in accordance to laws and regulations
9- Any condition or secret agreement aimed at blocking or trying to block access to
documents and information that must be made public in accordance to this article in
considered in violation of the law and is considered void
B- Publicizing the information stated in Section A of this article does not extend to
and has no effect on the oil and gas industry royalties that must be kept secret in
accordance to the national or international laws except for financial information
C- Any person or governmental entity obligated to publish information mentioned in
section A of this article shall publish it in publicly accessible media
D- The Ministry shall issue the regulations needed for implementing the laws of this
section including the legal basis covering what should be included and an exempted
as mentioned in Section B of this article
ARTICLE 37
Implementing Anti-Corruption laws
A- Any rights’ contract shall be considered void if it is in violation of any of the laws
of the Republic of Iraq, particularly the Iraqi anti-corruption laws
B- The authorized person’s violation of the Iraqi anti-corruption may lead to the
cancellation of his rights contract, in whole or in part. Each rights contract shall
include terms indicating these conditions
C- Any person who violates the Iraqi Anti-corruption laws may be prosecuted under
the criminal law active in Iraq
ARTICLE 38
Competitive Public Bidding
A- All oil companies working in the Republic of Iraq shall submit public bids on a
competitive basis in order to offer any goods or services, and this should occur in
accordance to the general bidding laws and the Federal Oil and Gas Council shall
determine the maximum amount that can be excluded from the bidding process
B- Bidding by the holders of petroleum operations rights stated in this law shall be
competitive and in accordance with the petroleum laws and with the special terms of
the related contracts
C- All public bidding must be allowed to the public within a reasonable timeframe,
must declare thereafter the reasons for selecting the chosen bid, the complete results
of the bidding call must also be published, and competitors must be given the
opportunity for raising objections
D- Any contract that is signed in violation of the regulations set by this article shall be
considered void and inactive
ARTICLE 39
RESOLUTION OF DISPUTES
A- Any disputes arising from the interpretation and application of this Law, the
Regulations for Petroleum Operations and the terms and conditions of contracts shall
in the first instance be attempted to be resolved in good faith by means of negotiation
among the parties.
B- If the dispute cannot be resolved by agreement, the matter shall be referred to the
Minister to resolve through discussions with senior officers of the holders of rights
concerned. Failing resolution through these discussions the matter of dispute may be
submitted to arbitration or to the comp****t judicial authority.
C- If the dispute relates to a technical, engineering, operational or accounting matter
relative to Petroleum Operations and is of a kind that is readily subject to resolution
by an expert in the relevant field, the parties may refer the dispute to an independent
technical expert for a recommendation as to the resolution of the dispute. If a party
does not accept the recommendation of the expert, it may initiate arbitration
proceedings according to ARTICLE 41/D below.
D- Arbitration between the State of Iraq and foreign investors shall be conducted in
accordance with the following rules:
1- Rules of Procedure for Arbitration Proceedings of Paris, Geneva, or Cairo Chamber
of Commerce for the Settlement of Disputes between States and Nationals of other
States or pursuant to the Convention on the Settlement of Disputes between States and
Nationals of other States and based on the Iraqi Law.
2- Laws and regulations of internationally recognized institutions, in accordance to
what different contractors agree upon, but all parties must declare the conditions of
implementation in the contract, including the method of assigning referees, and the
time limits and deadlines for decision making.
ARTICLE 40
EXISTING CONTRACTS
1- The Specialized Entity in Kurdistan Region Shall review all existing Exploration
and Production contracts signed with any entity before the enactment of this law to
ensure its harmony with the general goals and regulations of this law and to ensure the
maximum financial benefit for the Iraqi people, taking in consideration the objective
conditions of signing those contracts, in a period not exceeding three months from the
time this law is enacted. The Bureau of Independent Experts shall evaluate contract
mentioned in the article and its opinion shall be obligatory to determinate how to deal
with such contracts.
2- The Ministry must review all the existing Exploration and Production contracts
signed with any entity before this law was in place to ensure harmony with the goals
and general regulations of this law. This review must be submitted to the Federal Oil
and Gas Council, to ensure the maximum financial benefit for the Iraqi people, in a
period not exceeding three months from the time this law is enacted to ensure the
maximum financial benefit for the Iraqi people, and so that the federal council may
approve the review and confirm the contracts.
ARTICLE 41
Changes in Administrative boarders
In the case of changes in borders of regions or producing provinces, or in the case of
establishing new provinces, the new effected places shall be dealt with in accordance
to this law regarding to granting rights and petroleum operations.
ARTICLE 42
RELATIONSHIP TO EXISTING LEGISLATION
Any article in prejudice to this law shall cease to be effective on adoption of this Law.
ARTICLE 43
ENTRY IN FORCE
This Law enters into force after publication in the Official Gazette.