National Oil Company: The Kurdistan region’s action to conclude oil contracts and agreements with international companies and countries to export oil and gas violates the provisions of the constitution

Baghdad The National Oil Company confirmed: “The Kurdistan region’s decision to conclude oil contracts and agreements with international companies and countries to export the extracted oil and gas violates the provisions of the constitution, because the federal government’s competence is to draw up a policy for oil and gas development and manage the activity related to them and its competence in foreign trade.”

 

A statement by the National Oil Company – Department of Petroleum Contracts and Licensing titled “A cost-contractual analysis of oil contracts in the Kurdistan region” stated: “The competence of the federal government in managing the current fields does not negate its lack of competence in managing the fields that will be discovered in the future, and saying otherwise will lead to illogical results, most notably that some Regions of the state and other regions will participate in the fields explored before the constitution comes into force on the one hand, and they will be alone in managing and exploiting the new and explored fields on the other hand, in their lands, which leads to the inflation of their imports and the increase in the welfare of their residents compared to the regions and governorates that are not organized in a region in the country.

 

It explained: “The fact that any region concludes oil contracts and agreements with international companies and countries to export the extracted oil and gas violates the provisions of the above constitution because the federal government’s competence is to formulate oil and gas development policy and manage the activity related to them and its competence in foreign trade.”

 

The company indicated, according to the statement, that: “The financial terms of service contracts prepared by the Ministry of Oil, which will be approved for redevelopment, comprehensive development or exploration in all licensing rounds, are the best compared to the financial terms of production-sharing contracts, whether it is for the state or foreign companies (contractor). In production-sharing contracts for the region’s fields, the contractor is given a share of the extracted oil, in addition to the freedom to dispose of his share of the produced quantities and sell them at the place and time specified by the contractor.

 

It continued: “In spite of this, the region authorized foreign companies to have full control over the petroleum operations through the terms of the production-sharing contracts for the region, as one of these clauses included “that the government and each contractor entity have the right and obligation to sell or dispose of their oil shares in kind,” meaning that the government of the region has granted the contractors the right to sell their share of the produced oil and pay the government’s share, as the opposite is supposed to be true, and this means that the principle of production control lies with foreign companies and this is in contrast to the service contracts for licensing rounds of the Federal Ministry of Oil, all the oil produced through licensing round contracts, it is sold by the Oil Marketing Company (SOMO) at competitive prices that achieve the highest revenues for the Iraqi people.

 

The Federal Ministry of Oil indicated that the financial terms of production-sharing contracts for the Kurdistan region – Iraq, compared to the financial terms of service contracts, have achieved very high benefits and profits for foreign companies at the expense of the government due to the absence of the principle of transparent competition and the resort to a direct bilateral agreement with companies when referring those contracts. It was approved by the Federal Ministry of Oil in the oil licensing rounds, which caused the loss of the opportunity to obtain the best commercial terms to maximize the financial revenues from the sale of oil produced from the fields of the region, where the financial revenues to the regional government are no more than 80% as an average after deducting production costs ( The cost of producing a barrel of oil), while the financial revenues for the first and second licensing rounds amounted to more than 94.5% to 96.5%, and as shown in the attached commercial plans, and that the production costs are equivalent to (4) times the production costs in the licensing rounds of the Federal Ministry of Oil.

 

On the other hand, it stated, the regional government signed on itself, through production-sharing contracts, a contractual obligation to exempt contractors from taxes and allowed them to inflate their profits without imposing any kind of taxes or sharing those inflated profits, especially when oil prices rose globally, and this violates the tax law of 1982. (Modified) and its instructions.

 

The Ministry of Oil clarified that the Kurdistan region did not adhere to the quotas allocated to Iraq under the OPEC agreements, which negatively affected the quantities of oil allocated to Iraq from the central and southern fields, and thus had a negative impact on the financial revinues of the federal government, despite bearing its burdens by securing the salaries of its people in the region.

 

Source: National Iraqi News Agency

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