KRG opposes pending service contracts
ERBIL, Iraq, June 23 (UPI) -- The federal government of Iraq should not award service contracts to oil companies because those contracts are riddled with flaws, Kurdish officials say.
Baghdad is set to announce the winners of several service contracts for oil and gas fields June 29. Representatives with the state-run South Oil Co. have said national companies should reap the benefits while Iraqi Oil Minister Hussain al-Shahristani faces lawmaker questioning over the need to invite foreign companies into the country following years of federal investments.
In an open letter to the federal government, Ashti Hawrami, the natural resource minister for the Kurdistan Regional Government in Iraq, says the contract awards should be canceled.
"The federal government should not proceed with the service contract awards," he writes. "These contracts are being rushed, perhaps to meet short-term political objectives and to obscure past mistakes and failures."
He goes on to write that the federal government should move ahead with "a proper constitutionally based oil and gas law and revenue sharing law" to develop new contractual terms.
The KRG, for its part, began oil exports from its Taq Taq and Tawke oil fields beginning June 1, depositing the revenue in federal coffers.
Hawrami complains the contracts are structured such that contractors can maximize the cost of production rather than the efficiency of production.
Supermajors Royal Dutch Shell and BP join a group of 32 foreign oil companies bidding on six oil fields and two gas fields.