BIG WAVE
06-12-2006, 05:52 PM
Q. Can you explain and elaborate on the oil and gas related Articles, particularly the role of Baghdad, the revenue distributions, field operations controls and relations with OPEC, oil exports, etc? </B>
A. There are two specific Articles and a governing Article in the Federal Constitution relating to the oil and gas resources.
Article 111 states that:
“Oil and Gas are the property of all Iraqi people in all Regions and Governorates”.
This Article is intended to clarify that these natural resources remain public and cannot be sold to the private sector. The additional text added at the end of this Article (shown in italics and underlined) stresses the rights of the people in the Regions and the Governorates to these resources, but it does not deal with the revenue sharing, as this is defined separately in Article 112.
Article 112; this Article has two distinctive Parts.
Part (1): deals with the existing producing fields and is stated as follow:
“The Federal Government in cooperation with the producing Regions and Governorates shall administer the Extracted (Produced) oil and gas from the existing oil and gas fields provided that the proceeds (revenues) are evenly distributed in accordance with the demographic distribution around the whole country, and a specific share of the proceeds for a specific period of time, shall be allotted to the Regions which were unjustly deprived by the previous regime, and were affected by it, to secure a balanced development of the different areas of the country and this shall be regulated by law”.
This part of Article 112 makes is clear that the role of the Federal authorities is only an administrative role confined to the handling (i.e. exporting and marketing) of the Extracted oil and gas from existing producing fields. This does not entitle the Federal authorities a broader role on operations; otherwise the word Extracted (i.e. produced) would not have been inserted in the text (the right to handle the Extracted oil and gas is directly related to the revenue distribution). Therefore, the Federal administrative role does not extend to the actual oil and gas “extraction process” (e.g. drilling, field operations, the day to day running and management of the oil and gas fields). However, this should not be a problem, because these functions are currently (as they have always been) locally managed by the people living in the Regions and the Governorates. However, under the new constitution the elected authorities of the Regions and the producing Governorates are now entitled to administer/supervise the extraction process (i.e. the local oilfield managers are answerable to the local authorities, and this is not a big deal, after all we all live in one Iraq). It is also clear that even the limited handling role available to the Federal authorities is conditional upon an agreement being reached with the Regions and the Governorates on the following:
a. an even demographic distribution of the oil and gas proceeds (revenues),
b. a specific additional share/top-up amount (above the demographic rights), for a period of time, for all the deprived areas.
This means by reaching an agreement with the Regions and Governorates on a range of clearly defined and legally binding formulas to unconditionally allocate the percentage revenue entitlement of each Region and each Governorate for the initial period (to be defined) to redress the balance and also for the long term future entitlements beyond the initial period. Of course there should be no dispute that the Kurdistan Region and many of the Southern Governorates had been deprived areas for a long time; therefore they would expect to receive/negotiate a reasonable share of the top-up revenues.
Part (2): This part of Article 112 then deals with the strategic policy issues and states:
“The Federal Government together with the governments of the Regions and Governorates shall put in place (draw-up) the required strategic policies for the development of the natural oil and gas resources in order to achieve for the Iraqi people the highest benefits by adopting the most modern market-driven principles, techniques to encourage investments”.
Here the emphasis is on an agreement being reached between the Federal authorities and the Regions and the Producing Governorates to draw-up strategic policies for all of Iraq (this is primarily the overall short term, medium and long term production targets/production limits that can be achieved/allowed from each Region and Governorate, and the overall relations with the OPEC quota for Iraq).
Any laws related to the Article 112 need to be agreed with the Regions and the Governorates. Therefore, the only difficulty here is if no agreements are reached, then the Regions and the Governorates are entitled to create their own local laws which will prevail over the Federal laws by relying on the use the powers of Article 115 in their favour. This can only happen if one of the parties becomes unreasonable, but we should remain optimistic that this will not happen.
http://www.krg.org/articles/article_detail.asp?LangNr=12&RubricNr=&ArticleNr=11678&LNNr=28&RNNr=70
A. There are two specific Articles and a governing Article in the Federal Constitution relating to the oil and gas resources.
Article 111 states that:
“Oil and Gas are the property of all Iraqi people in all Regions and Governorates”.
This Article is intended to clarify that these natural resources remain public and cannot be sold to the private sector. The additional text added at the end of this Article (shown in italics and underlined) stresses the rights of the people in the Regions and the Governorates to these resources, but it does not deal with the revenue sharing, as this is defined separately in Article 112.
Article 112; this Article has two distinctive Parts.
Part (1): deals with the existing producing fields and is stated as follow:
“The Federal Government in cooperation with the producing Regions and Governorates shall administer the Extracted (Produced) oil and gas from the existing oil and gas fields provided that the proceeds (revenues) are evenly distributed in accordance with the demographic distribution around the whole country, and a specific share of the proceeds for a specific period of time, shall be allotted to the Regions which were unjustly deprived by the previous regime, and were affected by it, to secure a balanced development of the different areas of the country and this shall be regulated by law”.
This part of Article 112 makes is clear that the role of the Federal authorities is only an administrative role confined to the handling (i.e. exporting and marketing) of the Extracted oil and gas from existing producing fields. This does not entitle the Federal authorities a broader role on operations; otherwise the word Extracted (i.e. produced) would not have been inserted in the text (the right to handle the Extracted oil and gas is directly related to the revenue distribution). Therefore, the Federal administrative role does not extend to the actual oil and gas “extraction process” (e.g. drilling, field operations, the day to day running and management of the oil and gas fields). However, this should not be a problem, because these functions are currently (as they have always been) locally managed by the people living in the Regions and the Governorates. However, under the new constitution the elected authorities of the Regions and the producing Governorates are now entitled to administer/supervise the extraction process (i.e. the local oilfield managers are answerable to the local authorities, and this is not a big deal, after all we all live in one Iraq). It is also clear that even the limited handling role available to the Federal authorities is conditional upon an agreement being reached with the Regions and the Governorates on the following:
a. an even demographic distribution of the oil and gas proceeds (revenues),
b. a specific additional share/top-up amount (above the demographic rights), for a period of time, for all the deprived areas.
This means by reaching an agreement with the Regions and Governorates on a range of clearly defined and legally binding formulas to unconditionally allocate the percentage revenue entitlement of each Region and each Governorate for the initial period (to be defined) to redress the balance and also for the long term future entitlements beyond the initial period. Of course there should be no dispute that the Kurdistan Region and many of the Southern Governorates had been deprived areas for a long time; therefore they would expect to receive/negotiate a reasonable share of the top-up revenues.
Part (2): This part of Article 112 then deals with the strategic policy issues and states:
“The Federal Government together with the governments of the Regions and Governorates shall put in place (draw-up) the required strategic policies for the development of the natural oil and gas resources in order to achieve for the Iraqi people the highest benefits by adopting the most modern market-driven principles, techniques to encourage investments”.
Here the emphasis is on an agreement being reached between the Federal authorities and the Regions and the Producing Governorates to draw-up strategic policies for all of Iraq (this is primarily the overall short term, medium and long term production targets/production limits that can be achieved/allowed from each Region and Governorate, and the overall relations with the OPEC quota for Iraq).
Any laws related to the Article 112 need to be agreed with the Regions and the Governorates. Therefore, the only difficulty here is if no agreements are reached, then the Regions and the Governorates are entitled to create their own local laws which will prevail over the Federal laws by relying on the use the powers of Article 115 in their favour. This can only happen if one of the parties becomes unreasonable, but we should remain optimistic that this will not happen.
http://www.krg.org/articles/article_detail.asp?LangNr=12&RubricNr=&ArticleNr=11678&LNNr=28&RNNr=70