Thread: Iraq/Dinar News. 09/05 to 01/14/07

Originally Posted by Justpraying

One Last try

Will anyone point me in the Direction of any information that is available on the HYDROCARBON LAW!

Please.

Finally I found a decent article about this! So I will answer my own request

I know that there are others that were asking for this also, so here you be.



HYDROCARBON LAW

Kurdistan Regional Government Hydrocarbon Law: A Commentary | Iraq Updates


Kurdistan Regional Government Hydrocarbon Law: A Commentary
By Tariq Shafiq
________________________________________
20 September 2006 (Middle East Economic Survey)
1. Basic Survey
1.1 The Kurdistan Regional Government (KRG) has published drafts of two Hydrocarbon Laws: one for the Kurdistan Region and the other for the Iraq Federal (Central) government. The drafts have been circulated to officials from the US, UK, and Iraqi governments, as well as to the media. This move towards transparency is commendable. However, the publishing of the oil and gas production-sharing agreements (PSA) would certainly make the KRG a leader, in this respect, among Middle East governments, especially at a time when much has been rumored about the very generous profit split in favor of the companies.
1.2 The draft laws envisage a production-sharing basis for foreign investment, the terms of which are mostly consistent with standard PSA agreements elsewhere, which may be considered generous to the contractors in Iraq, as will be shown later. The KRG retains the option to accommodate other forms of contracts.
1.3 Tendering for licensing has been adopted, without abandoning the possibility of direct negotiations.
1.4 The initial exploration term is set at five years, extendable to a maximum of seven, with set amounts of exploration area relinquished with each extension.
1.5 Post-discovery development is set at 20 years, with an automatic five-year extension and the possibility of further extension on negotiated terms.
1.6 Minimum royalty levels are established at 7.5% for crude oil of up to 20° API rising, thereafter, in steps to 8.5 % for 30° API and to 10% for crude above 30° API. A minimum royalty rate of 5% is set for natural gas.
1.7 A variety of taxes are also outlined, including a windfall tax, but no figures are given.
1.8 Cost oil recovery is set at a maximum 70% for crude oil of 14° API, and a minimum of 55% for crude oil above 30° API. Production profit sharing on the remaining output is determined according to a formula (unpublished) which relates cumulative revenues to cumulative petroleum costs; one assumes the use of what is known as R factors to calculate the profit oil split between the contractor and government.
1.9 The draft law specifies that contractors are obliged to provide sufficient volumes of crude oil to meet local consumption needs and priority should be given to local partners, and training and technology transfer in a package generally known as “local content.” However, no percentage is specified.
1.10 Standard dispute procedures by the Kurdistan Ministry are adopted allowing international arbitration as a last resort. However, this is applied to all disputes relating to oil and gas operations, including disputes requiring unitization for oil and gas fields over Kurdistan’s borders, and also fields straddling foreign state borders, which ordinarily come under the prerogative of the Federal or Central sovereign state.
1.11 With regards to the legal framework, to quote a consulting firm, PFC Energy’s Advisors, which describes the legal foundation of the KRG’s petroleum law: “It is worded in dispassionate legal language, the proposed laws are politically incendiary, reflecting an effort by the Kurds to impose their own maximalist federal (or in this case confederal) interpretation of the new constitution on the country’s hydrocarbon sector. In that sense, the draft laws are Kurdish nationalism dressed up as national petroleum legislation, designed to alter the balance of authority in favor of the regions, and leaving the KRG as a quasi-independent state.”
1.12 Licensing, for example, requires the approval of the KRG parliament only. “Taken in tandem, the draft laws often read more like treaties between sovereign governments. The Kurdish Region law asserts that full sovereign title and management authority over petroleum resources within KRG boundaries rest locally.” This covers the areas which the KRG describes as ‘disputed territories.’ It includes: Kirkuk, parts of Mosul, Sallahdin and Diyala. “It proposes the establishment of regional institutions (including a local operating company and an oil sales arm) to manage the sector, and states categorically that negotiating deals and licensing third-party in Kurdistan operations region is the exclusive purview of the KRG.”
1.13 While the KRG law accepts that Article 112 of the constitution limits its unilateral control over production from current fields, the draft explicitly refutes the notion that these field operations will be managed independently by the Ministry of Oil in Baghdad or a future INOC. Joint management is allowed only on basis of prior agreement between the KRG and the central government, with the former granting the license to participate in upstream operations.
1.14 Otherwise, this agreement limits the relationship between the KRG and the central government concerning the management of petroleum affairs to one of cooperation between the existing and the newly formed Kurdish organizations, with a suggested National Petroleum Committee to determine among the producing regions and governorates the allocation of quotas established for Iraq by OPEC, and with a National Revenue Commission, deriving the cause of its founding from the Iraqi constitution, to verify the distribution of national revenues among the governorates and the regions. Decisions taken by the Commission are based on unanimity, thus allowing veto power to the regions and governorates.
1.15 The KRG, also limits further the role of the Central government to that of an administrative one confined to the handling, ie exporting and marketing, of the “extracted” oil and gas from “existing producing fields,” in accordance to the KRG interpretation of Article 112.
1.16 Current Fields are defined as the oilfields that have been producing more than 20,000 b/d over the previous year up to the last voted Constitution on 22 August, 2005. As a result, minor or aging fields, plus discovered but undeveloped fields amounting to around 60 oil or gas field out of a total of 80, will revert to KRG and other regions and governorates.
1.17 The KRG places all the present upstream and downstream facilitates and infrastructure under the management of its Ministry of Oil for its own use and others authorized by them and/or the central government.
2. Present Status
2.1 The government of the Kurdistan Democratic Party signed a PSA agreement with Norway’s DNO in 2004 to drill for oil near the border city of Zakho, where profit oil is said to be 40% to the contractor with a front loaded cost recovery. This was a pioneering agreement which signaled Kurdistan’s intent to develop its own oil resources.
2.2 The government of the Patriotic Union of Kurdistan, based in Sulaymaniya had, prior to this date in January 2003, signed an agreement with a Turkish oil company, PetOil and Petroleum Products International Exploration and Production Inc, near the city of Chamchamal, the site of several structural oil and gas domes such as Chiasorkh, Pulkhanah and Chemchamal. Again a PSA agreement was signed with the contractor’s profit oil set at 49%, and a front loaded cost oil recovery of 80% to 90%.
2.3 There are today some eight foreign oil companies carrying out studies in Kurdistan. In addition to DNO, oil companies exploring in Kurdistan include: Petoil and General Energy Corp, both Turkish; Woodside of Australia; and Canadian companies Western Oilsands Inc and Heritage Oil Corp which formed a joint venture with Eagle Group of Iraq, based in northern Iraq. All agreements are of PSA format.
2.4 Iraq is estimated to have in excess of 215bn barrels of potential reserves and 115bn barrels of proven reserves, totaling over 330bn barrels. Of this the Kurdistan region has been allocated 10% or 33bn barrels of crude oil which puts it almost on par with international oil regions such as the Caspian and North Sea.
2.5 An average oilfield discovery in Iraq houses a reserve of some 1-2bn barrels. None of the above oil companies has total reserves worldwide that measures any where near this figure. Most of them would hardly qualify for a PSA in any of the leading oil producing countries. However, clearly, these are speculative moves by companies which are prepared to take high legal and political risk for high reward, as will be shown in the economics evaluation below.
3. Economics Of The KRG’s PSA Agreements
3.1 With no published agreement clearly only highlights of the economic parameters can be estimated from the measure of the profit oil split to the government and the contractor and the maximum cost allowances.
3.2 Petrolog & Associates, of which I am the director, has worked out the economics of PSA agreements in Iraq for a variety of oilfields development. Capital investment costs in the range of $3,000 to $6,000 per unit production capacity (1 b/d, ie 365 barrels per year), an operating cost of $1.5 per extracted barrel for a range of revenues resulting from prices ranging $18, $35 at today’s price of $70/B, have been used to estimate economic yardsticks for oil field ranging from 1 to 10bn barrels in Iraq. An average Iraqi field would have a reserve of over 1bn barrels and nearly 2bn.
3.3 The results relevant to KRG PSA agreements are summarized below:
For an oilfield development of 1bn barrels on a PSA, such as that of KRG, having a cost allowance of 60% and a company profit split of 40-49%, the company’s Internal Rate of Return (IRR) would be 60-66%, for a revenue based on a crude price of $35, which would jump to 90-99% at today’s price of $70.
3.4 A fair return of 15% IRR to the investing contractor company could be achieved by allowing 2% (to the Investing Company) vs 98% to the government, for crude oil price of $35.
3.5 These results lead to the conclusion that: while the draft law’s fiscal terms and conditions for the PSA are impressive, KRG’s record from its PSA agreements shows windfall profit to the investing contractor. This contravenes Iraq’s national constitution which requires maximum return to the nation.
4. Legal Framework – An Authoritative Independent Legal Interpretation
4.1 Ownership Of Oil Resources
Article 111 is unequivocal that all oil and gas is owned by “all the people of Iraq in all regions and governorates.” The language, on the face of it, does not admit to the ownership of any particular resource by any particular group or geographical or political region. In effect it gives all citizens of Iraq, wherever resident, an undivided interest in all of the oil and gas resources of the country. Notably it does not vest oil and gas resources in the ‘state,’ nor does it allocate the resources to particular regions or governorates. The regions and governorates are addressed solely in the collective form. Moreover it refers to all of the oil and gas resources and does not use the limiting language of “current fields” included in Article 112 First.
Given that oil and gas is the property of the “people” as a whole, any power to alienate the resource by sale or other disposition lies with the “people.” In this regard it is worth noting that the only political entity representing all of the people of Iraq is the Council of Representatives; Article 49, First refers.
4.2 Management Of The Resources
Article 112 First provides that the federal government, with the “producing” governorates and regional governments, shall manage oil and gas “extracted from present fields” subject to a revenue distribution formula. “Management” in Article 112 is not defined nor is it subject to any words of limitation. Thus management should be read in the ordinary sense of conducting or supervising all of the business aspects relating to oil and gas extracted from present fields, eg production, transport, refining, disposition.
Article 112 Second provides that the federal government, again with the producing regional and governorate governments, shall establish the strategic policies for the development of oil and gas in accordance with certain standards. Article 112 Second does not contain the limiting words “extracted from present fields.”
Thus Article 112 provides a general structure for the oil and gas sector in which strategic policies are set on a unified basis for all of the oil and gas resources of the country, and then the implementation of those policies is managed in one case (oil and gas extracted from existing fields) by the federal government with the producing governorates and regional governments, and in the second case (oil and gas not extracted from existing fields) by the regions or the governorates. In the second case the regions and governorates assume their power to manage by virtue of Article 115.
The word “extracted” does not connote a limitation in this management authority but rather should be read as defining what oil and gas resources are subject to the management authority of Article 112 First, ie oil and gas “extracted from present fields.” Article 112 envisions two functions: the establishment of oil and gas policies and management of the oil and gas resource. Nothing suggests a tripartite definition in which “extraction” would not be subject to either the strategic policies or the management function.
4.3 Authority Of The Regions Under Article 112
Article 112 First provides that the “federal government, with the producing governorates and regions” shall undertake the management of the designated resources. Article 112 Second provides that the “federal government, with the producing regional and governorate governments,” shall formulate strategic policies.
Article 112 First provides at the end of the section for the matters addressed in the section to be regulated by a law. The same provision for regulation by a law is not included in Article 112 Second dealing with the formulation of strategic policies. Perhaps, the drafters did not view “policies” as requiring legislation, and that the required law governing management would reflect the policies.
The precise nature of the interaction of the federal government and the regions and governorates under Article 112 is not clear and may have been left deliberately ambiguous. Article 112 by its language and its separation from Article 110 (the exclusive authorities of the federal government) and Article 114 (the shared competencies) is evidently something more than a shared competency but something less than an exclusive competency. Some sort of collaborative or consultative process is required. Two items, however, point to the leadership of the federal government in the process. In both the first and second sections, the federal government is the subject of the sentences and is commanded to act, albeit with the producing regions and governorates. Secondly, in Article 112 First the activity subject to the section is to be regulated by “a law.” The unitary reference to “a law” as elsewhere in the Constitution refers to federal legislation. Thus whatever the form of collaboration between the governmental units, the final action is to be determined by the federal legislative council.
The leadership of the federal government in Article 112 is further reinforced by Article 110 which sets out those areas where the federal government has exclusive authority. Among the exclusive authorities of the federal government are “formulating foreign sovereign economic and trade policy”; and “regulating commercial policy across regional and governorate boundaries in Iraq.” Thus, the shared authority of Section 112 is cabined by the power of the federal government to prescribe and set policies whenever trade or investment crosses national, regional or governorate boundaries or involves trade or investment moving in and out of Iraq. Regional action in violation of such policies would be unconstitutional as it infringes upon areas committed to the exclusive authority of the federal government.
4.4 Limitation On Present Fields
The principal negotiators of Article 112 First appear to agree that that the management authority provided by the section does not apply to all gas and oil resources. Rather it extends to oil and gas “extracted from present fields.” The phrase needs to be broken up into its component parts. Nothing in the constitution suggests that “field” should be given anything but its ordinary understanding in the petroleum industry and in Iraq. The Society of Petroleum Engineers defines field as follows: “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.”
Rather the controversy surrounds the qualifier “present.” Some including certain Kurdish authorities have construed “present” as meaning “presently producing” or “presently capable of being produced.” The difference is not trivial. In the absence of other limiting language, however, “present” should have its ordinary meaning of “existing.” There is still the issue of present when? Most people seem to believe that it meant existing at the time of the compromise or perhaps more precisely when the Constitution came into effect.
5. Concluding Remarks
5.1 Iraq today is enduring a number of damaging trends of Tsunami dimensions. There is a widespread lack of security and law and order, and killing for reasons of identity, ethnicity, sect, or criminal ends; and a widespread lack of efficiency in government organizations and a near absence of institutional performance or sound management at the centre and especially in the provinces.
5.2 Action to reverse these damaging trends ought to be all-embracing in nature, coordinated and united in approach, having the welfare of country and nation at heart above all considerations.
5.3 This KRG draft petroleum law is tantamount to a sovereign act and, in effect, is a move in itself and by its implications that could encourage fast, unplanned, uncontrolled devolution. This will exacerbate these damaging trends by inducing similar provincial moves among the ‘haves,’ opening the way to border disputes with the ‘have-nots."
5.4 Oil habitat is regional in nature which recognizes no man-made borders of a provincial nature. The pursuit to its exploration, discovery and development requires equally national not local vision and economic planning, which benefits from the economies of scale, sets the right priority, avoids uncontrolled competition, adopts unified licensing policies and submits to the approval of the nation’s representative and elected body, parliament.
5.5 This draft law is not in conformity with the foremost objective of the constitution to preserve the unity of its people, land and sovereignty, nor with the overriding Article 111 which states and stresses that oil and gas are the property of all the nation in all the regions and governorates. The management of oil and gas has been delegated to its national government in consultation or cooperation with the regions and governorates, and so is the case with strategic policies.
5.5 The way forward is through balanced planning by the national government (responsible to all the nation’s representatives) in consultation and cooperation with the provincial government, guided by the principles of fairness, equity, transparency, efficiency and optimization of the benefits to the whole nation. Optimum benefits can only be realized from an optimum oil and gas resource management unconnected to the distribution of revenue.
5.6 Distribution of revenue for social and economic development and other state needs throughout the nation in all its regions and governorates should be entrusted to an independent, transparent and efficient commission elected from among members representing all sectors of the nation, having independent, transparent and efficient minds and attitudes to manage with wisdom, knowledge and equity.
Tariq Shafiq is Director, Petrolog & Associates, and Founding Director Iraq National Oil Company ([email protected]).
VOL. XLIX, No 37, 18-Sept-2006

Originally Posted by TheBrain

Thanks, thats the Kurd law though.

Kurdistan Regional Government Hydrocarbon Law: A Commentary (KurdishMedia.com)

It talks about both the Kurd and the National! I am not sure how you would seperate them, but at least it is a basis until we see the final and gives us a bit of understanding about it.

sotaliraq.com


Sotaliraq.com

Well hopefully it works. If it dose not, it may have to do with the black out!

Also I think charmedpiper origanally posted this.

Originally Posted by TheBrain

You translated it correctly, basically it is all tied to godaddy.com as all the nameservers I mentioned are owned by them.
Reverse Ip

Reverse Ip

Hope that helps.

so are you saying this is a 48 hour+ mistake?

Originally Posted by goldraker

sotaliraq.com


Sotaliraq.com

Well hopefully it works. If it dose not, it may have to do with the black out!

Also I think charmedpiper origanally posted this.

From the Captioned picture with the article it looks like it is about one of Bush's speeches.

Originally Posted by Justpraying

From the Captioned picture with the article it looks like it is about one of Bush's speeches.

Ok link to translation, lets see if this works.

Translated version of http://sotaliraq.com/

Originally Posted by TheBrain

LOL I knew it was sotaliraq.com I was asking for the direct link to the translation. That's OK I'll dig for it.
Thanks.

You would have to ask Charmedpiper about that. It looks like a recent article of 10/11/2006 though! Shouuuuuuuu! So hopefully this is real and current and not 3 years old! lol


Quote:
Originally Posted by CharmedPiper
Barham Ahmed Salih discuss steps to ensure the success of the International Decade

(Voice of Iraq) - 10 - 11-2006 | This issue was sent to a friend

Union : The Preparatory Committee for the International Decade with Iraq yesterday its second meeting at the level of working groups at the headquarters of the United Nations to help Iraq in Baghdad. The meeting was chaired by the Deputy Prime Minister Barham Ahmed Salih, the Special Representative of the Secretary-General of the United Nations, Mr. Ashraf Qazi. Participated in the meeting a high-level delegation from the Iraqi government, including the Minister of Finance and Minister of Planning and the Deputy Minister for Foreign Affairs and Vice-President of the Republic advisers and advisers to the Prime Minister and official spokesman for the Iraqi government as well as representatives of the Member States in the preparations for the International Decade with Iraq (a the European Commission and United States of America, the United Kingdom, Italy, South Korea, Germany, France and Japan).

The meeting was also attended via video Konfrence representatives of the presidency of the European Union, the World Bank and the United Nations headquarters in New York and the Arab Fund and the Islamic Development Bank. The meeting discussed the progress made so far and the next steps to ensure the success of the International Decade with Iraq. These include steps in addition to other steps to expand and to review the preliminary draft of the International Decade with Iraq in order to reflect comments by Iraqi officials and donor countries. The outcome of the meetings would be submitted to the preparatory committee at the next meeting to be held in Baghdad on October 19 Sunday.

Sotaliraq.com


October 19,2006 is next week. It falls on a Wednesday..

Originally Posted by TheBrain

LOL I knew it was sotaliraq.com I was asking for the direct link to the translation. That's OK I'll dig for it.
Thanks.

Here also is the direct link to google language tools. Scroll down until you enter URL to be translated and then select Arabic to english and have a ball.

Language Tools

Originally Posted by jsfletcher

so are you saying this is a 48 hour+ mistake?

I ain't buying the 46 Hr. + mistake either . . .

They're keeping it down for a specific reason . . . not sure what it is but think it has to do with a black-out or is part & parcel with stopping buy / sell / trade their currency . . .

Maybe this ongoing mystery is giving them the time they need to do something big . . . ??? . . . I've always thought it would take them 3 days to impliment, the "you-know-what" . . .

Originally Posted by frathousemicrowave

"I found a lady bug".........<<--This level please. .

And the whole world is still guessing why the site is down?? Unbelievable!! It is a mistake????[/COLOR] ok maybe a deliberate one...