Iraqi Cabinet Endorses Draft of Long-Awaited Oil Law, U.S. Says

The Iraqi Cabinet endorsed a draft of a long-awaited oil law today and sent it to the country's parliament for consideration, according to U.S. officials.

The document sets the framework for international investment in the country's oil and gas industries and affirms that energy revenue is supposed to be shared among the country's regions, U.S. Ambassador Zalmay Khalilzad said in a statement from Baghdad. Prime Minister Nuri al-Maliki ``has given his benediction'' to the measure, President George W. Bush's spokesman, Tony Snow, told reporters in Washington.

``This is a significant political achievement,'' Khalilzad said. ``Leaders representing all of Iraq's communities have demonstrated that they can pull together to resolve difficult issues of national importance.''

At stake is access to the world's third-largest oil reserves, a resource that could unite or further divide Iraq's factions amid a violent sectarian conflict. The Bush administration has demanded passage of an oil law as a condition for providing continued military support to the national Iraqi government.

Demands by the Kurdish administration to develop the oil- rich north had to be reconciled with the insistence of the Shiite-led government to maintain national authority over oil.

The draft says revenue will be poured into a central fund and then doled out to all 18 provinces based on population size, the Associated Press reported. That is a concession to Iraq's minority Sunnis, whose central and western homeland has few proven reserves, according to AP.

Federal Council

All Iraqi regions and provinces will be represented by a federal council in charge of the revenue distribution, Khalilzad said in his statement.

Maliki described the draft measure as ``another foundation stone'' in building Iraq, AP reported.

The draft affirms that the semi-autonomous Kurdish region can negotiate its own contracts with international oil companies, an issue that had been a sticking point, according to Jonathan Morrow, an Australian lawyer who advises the Kurdish minister of natural resources.

In a concession to the central government in Baghdad, the Kurdistan Regional Government agreed that the contracts can be subject to review by independent arbitrators, Morrow said by telephone from Dubai.

There are five existing contracts in the Kurdish region, including companies from Turkey, Canada and Norway, according to the Kurdistan Regional Government's Web site. The Kurdish government agreed that fields in current production, including those in the disputed city of Kirkuk, would remain under control of the central oil company, a statement on the Web site said.

Kirkuk Issue

Kurds seek to bring Kirkuk under their regional authority through a referendum that neighboring Turkey wants delayed out of concern that Kurdish control would spark a violent reaction from Arab residents.

Today's draft mostly addresses control of the country's oil production and its untapped reserves, Morrow said.

``The Kurdistan regional government is only prepared to make the concessions they just made if they can be sure that they are going to get their fair share of the revenues,'' he said.

Sixty-five of Iraq's 80 oil fields will be offered for development bids once the legislation wins parliamentary approval, the New York Times reported on its Web site, citing Iraqi Oil Minister Hussain al-Shahristani.

Iraq produced 1.76 million barrels of crude a day last month, according to Bloomberg estimates. The country aims to triple production by 2012.

source:www.bloomberg.com