2023-09-19 10:49:24
Chairman of the “KAR” Oil Group: Iraq needs a legal reference to invest oil
Throughout its history, since the discovery of oil regarding a century ago, Iraq has not known any partnership between the state and the local private sector, and the energy market remained for decades under the authority of the state, which monopolized the development of oil and gas fields. The field had barely opened in 2003 with the cautious entry of local companies that faced challenges related to expert human resources, operating in a turbulent geopolitical climate, and in a conflict zone dependent solely on oil resources.
The “KAR” oil group is among the few Iraqi companies that have been involved in oil investment during the past two decades. Its president, Baz Al-Barzanji, said in an interview with Asharq Al-Awsat: “The future of energy in an area of regional and international conflict is dependent on the success of the experience of local companies in developing an oil strategy.” “Priority of economics over politics and focus on developing the infrastructure of the oil sector.”
4 historical eras of Iraqi oil
Oil policy in Iraq went through four historical eras, beginning with the Ottoman era, through the establishment of the modern state and British Mandate rule, and then the period of the Republic and the policy of nationalization, ending with the experience of post-Saddam Hussein Iraq. In all of them, oil was a tool in the hands of politics, as described by Al-Barzanji, who believes that the vote on the Iraqi constitution in 2005 was an opportunity to unite Iraqis and their party activities on a “flexible oil policy that is available for growth and development.”
According to Al-Barzanji, Iraq’s experiences with oil investment put the decision-maker before the established fact that liberating oil from the power of politics has become a historical inevitability, and even countries that were adopting an ideological economy reached it early. Iraq can have a fixed decision to manage energy, as long as the Iraqi state adopts the principle of policy subordinate to the economy and not the other way around, so that development is the primary interest of oil and investment in it.
He pointed out that benefiting from successful models in the world requires the Iraqis to agree and understand a national oil policy, with maintaining the development of the oil industry being a priority in the short and long term. Al-Barzanji gives the Kurdistan region a promising example in this field, considering that the infrastructure of the oil sector in this active region represents an investment asset for Iraq, as reputable international companies have invested in this industry with the approval of governments and legal, banking and financial institutions. This type of partnership has finally helped to create a national oil policy that defines the role and scope of everyone in the oil sector, whether the region, or the private and public sectors.
Oil and gas law complex
In the past few months, political actors have been writing a new draft of the oil and gas law, which has been stalled since 2005, and it is unlikely that the final version will have a smooth passage in the Iraqi parliament, even with the political pledges of the forces in the “State Administration” coalition to fill the legal vacuum in which it operates. Accordingly, the oil companies.
In this context, the head of the “KAR” group believes that the Iraqi forces are facing different drafts of the law, one prepared by the federal government and another by the Kurdistan Regional Government, and between them there are views from the oil-producing provinces that must be respected. However, Al-Barzanji is unlikely to reach a unanimous law due to disagreement over the interpretation of the constitution, in addition to judicial decisions in either Baghdad or Paris, which have established a barrier between the parties concerned and made dialogue between them more difficult.
Al-Barzanji proposes a necessary path before legislating the oil and gas law, which includes interpreting the provisions of the constitution related to the management of natural resources, resolving controversial provisions, and arriving at a reference text that no one can bypass or tamper with. The path also includes an agreement on the mechanism for distributing oil financial revenues between the Kurdistan region – or the provinces – and the federal government, especially since the currently applied agreement is temporary and is renewed or changed every year in accordance with the budget law, as the changing political majority monopolizes its formulation in Parliament.
From here, the concerned parties in Baghdad and Erbil must resolve disputes over oil, as investors and companies may not enter as a party or part in this dispute except within the limits of technical and technical solutions.
Partnership with the Gulf
Al-Barzanji believes that the era of partnership with the Gulf has begun now, considering that from his point of view everything leads to success, as the Gulf people do not only constitute capital, but they have years of accumulated experience, and Iraq can benefit from it. It is now conducting advanced dialogues regarding the connection between electricity networks, in addition to studies and discussions carried out by Gulf companies to develop oil and gas fields within the next licensing round.
Optimism regarding the Gulf role in Iraq is not enough, Al-Barzanji says, as there is still an urgent need to provide a legal cover that protects investment contracts and ensures their continuity in a safe environment that the Gulf investor, and others, need, without such negotiations taking place under the cover of political calculations to conclude contracts that will not stand with their signature. .
The crisis with Iran
In contrast to the Gulf opportunity, the crisis between Iran and the world has affected the energy sector in the region, as there is tension around the Dorra field, complications in Basra gas, and bombing around Kurdistan fields. How can Iraq get out of this?
Al-Barzanji considers the crisis with Iran to be a clear example of the importance of putting the economy before politics, because the danger indicators are clear to everyone, and the repercussions of politics will directly affect the stability of the energy market and people’s daily lives. However, the world is observing a positive shift among the parties concerned with the energy file towards providing a safe trading environment that defuses the active crises now.
Iraq in the global gas market
Concerned research centers expect that, in the coming years, Iraq will occupy great importance in the global gas market. According to currently existing projects, it is supposed to succeed in producing three trillion cubic feet per day in 2026, but the regional equation makes reaching the end of this road very difficult.
Al-Barzanji says: “Iraq is now in the exploration phase, but we do not know the true production capacity of the fields. As for the discovered fields, oil institutions are required to develop them as quickly as possible, given the large gas deficit that Iraq suffers from.”
In the foreseeable future, Iraq will focus on the local need for gas. The current projects are in the process of restoring gas production and developing infrastructure, and the new contracts programmed in Iraq, including Kurdistan region contracts, aim to provide the needs of electricity generation and the requirements of industry and local consumers, in a way that does not justify any party or political party attacking companies operating in this sensitive sector. Export quantities are still just speculative numbers, due to deficiencies in transportation pipelines and infrastructure for natural gas production.
Return to the Turkish “Ceyhan”.
When will Iraq resume oil exports through the Turkish port of Ceyhan? This question has been frequently asked by all those concerned with the energy file in Iraq during the past months. According to Al-Barzanji, the return to this line depends on maintaining the pipeline affected by the Turkish earthquake last February, in addition to resolving the dispute resulting from the international arbitration decision that obligated Ankara to pay compensation to Iraq.
Al-Barzanji suggests continuing the dialogue between the two sides at the technical and political levels, and at multiple levels, noting that following the visit of Iraqi Oil Minister Hayan Abdul-Ghani to Ankara, the dialogue began to take a more serious turn between the two parties to develop technical, contractual and financial solutions to the current dispute, considering that there is a need It is urgent to intensify tripartite deliberations between Baghdad, Ankara, and the Kurdistan Region to reach a final and permanent solution as quickly as possible.
Iraq has relied on the current export line to the Turkish Ceyhan, with a capacity of one million barrels per day, which is the actual alternative that was used following the isolation of Kirkuk by ISIS, and its destruction of the line connecting to the opening south of Mosul, and today it has become a practical option according to Al-Barzanji, who saw that Iraq was able to connect Kirkuk oil via the current line and deliver it to global markets in record time, which is sufficient for additional quantities from other Iraqi fields, because the region’s oil does not exceed 450 thousand barrels per day.
It should be noted that the “KAR” group was founded in 1999, and began its activity in trading oil derivatives. It also concluded partnerships with the United Nations during the economic blockade on Iraq to provide heating fuel in the Kurdistan region, and concluded contracts in the field of building, construction and electricity. “CAR”, as the first Iraqi company, won a development and partnership contract in the “Khurmala” field and later in the “Sabbah and Al-Lhais” and “Hamrin” fields, while the value of partnership contracts with the Ministry of Oil reached regarding half a billion dollars during the years 2004 and 2006.
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