87.5% of profits from Iraq’s oil going to foreign oil companies for the next quarter century that’s what.
Troubles for the Iraq Oil Deal
Under the new law, agreed on Monday by Iraq’s cabinet, foreign oil companies will be allowed to cut long-term exploration and development deals with the government for 20 years, renewable for a further five years. Companies willing to operate in a country with high physical risks â€” insurgents regularly blow up pipelines and kill contractors â€” will be allowed to export their oil after paying the government a minimum 12.5% royalty, although there are usually also cash signing bonuses to the government, and most “profit oil,” extracted after operating costs are met, would likely go to Baghdad. Regional governments â€” only Kurdistan has one right now â€” can sign their own contracts under the law, a dizzying change from decades when Saddam dictated the terms and stifled oil production in Kurdistan. A Baghdad-based Federal Council on Oil & Gas will be formed; it will have 60 days to appoint a team to arbitrate a contract, if it has strong concerns.
The rumblings of opposition go beyond parliament to the oil fields themselves. Iraq’s biggest oil unions, which could potentially disrupt production, have been among the law’s strongest opponents. Hassan Jum’ah Awwad Al-Asadi, head of Iraq’s Federation of Oil Unions, the largest union group, says he intends to mobilize his 23,000 or so members against the draft. “We want a new, different law, which will be in the interests of Iraqis,” he said by phone from Basra on Wednesday. “If there is no solution we can stop production, stop exports.” In a more threatening tone, he told union members at a conference on the law in Basra in early February: “We strongly warn all the foreign companies and foreign capital in the form of American companies against coming into our lands under the guise of production-sharing agreements.”