Treatment of Oil in Iraq's 2005 Constitution

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The Iraqi Constitution of 2005 functions as the regulatory framework of Iraq's oil and gas sector. The Constitution contains several provisions that address, in somewhat vague terms, the control and distribution of natural resources.[1]

Articles concerning natural resources

Only two articles of the Constitution contain provisions that deal with Iraq's natural resources: articles 111 and 112.[2]

Article 111 of the Constitution states:

Oil and gas are owned by all the people of Iraq in all the regions and governates.[3]

Hence, the ownership of any particular resource is not attributed to any particular group or geographical or political region.[4]

Article 112 of the Constitution states:

First: The federal government, with the producing governorates and regional governments, shall undertake the management of oil and gas extracted from present fields, provided that it distributes its revenues in a fair manner in proportion to the population distribution in all parts of the country, specifying an allotment for a specified period for the damaged regions which were unjustly deprived of them by the former regime, and the regions that were damaged afterwards in a way that ensures balanced development in different areas of the country, and this shall be regulated by a law. Second: The federal government, with the producing regional and governorate governments, shall together formulate the necessary strategic policies to develop the oil and gas wealth in a way that achieves the highest benefit to the Iraqi people using the most advanced techniques of the market principles and encouraging investment.[5]

Because the term "present fields" is not defined, it remains unclear whether it includes fields that are only currently producing or if it extends to other fields. Similarly, whether the currently producing fields include partially developed fields also remains unclear.[6]

The proper roles and authorities of federal and regional authorities for equitably sharing oil and gas and making strategic decisions is also a point of contention.[7] The Iraqi federal government and the Kurdistan Regional Government (KRG) continue to clash over this, which is why new sector legislation as of late 2012 remained stalled.[8] The federal government maintains that the Constitution does not allow the KRG to adopt unilateral and permanent measures over the management of oil and gas fields. Under this interpretation any contract signed after the draft oil and gas law was agreed in February 2007 is deemed "illegal" until reviewed and approved by the Iraqi Ministry of Oil.[9]

Nonetheless, the Constitution does not expressly authorize either the Ministry of Oil or the ministry's Petroleum Contracts and Licensing Directorate (PCLD) to award contracts to international oil companies (IOCs) either. The Ministry of Oil interprets the legality of contracts awarded to IOCs on the grounds that:

1) the constitutional requirement for the approval of the Council of Representatives[10] (the 325-seat main elected body of representatives in Iraq)[11] only applies to international treaties and agreements between the State of Iraq and other States, so commercial contracts between Iraqi regional oil companies (ROC) and IOCs do not need such approval, and

2) the technical service contracts (TSC) were awarded under the proposed Hydrocarbon Law (despite the fact that this is not yet approved by the Council of Representatives).[12]

External Links

2005 Constitution: Full text (ar)

2005 Constitution: English translation (UN Iraq)

References

  1. "Oil and gas contracts in Iraq Who's Who Legal, July 2010.
  2. "Iraqi Constitution" United Nations Assistance Mission for Iraq, retrieved 14 December 2011.
  3. "Iraqi Constitution" United Nations Assistance Mission for Iraq, retrieved 14 December 2011.
  4. "Oil and gas contracts in Iraq Who's Who Legal website July 2010.
  5. "Iraqi Constitution" United Nations Assistance Mission for Iraq, retrieved 14 December 2011.
  6. "Oil and gas contracts in Iraq Who's Who Legal, July 2010.
  7. "Iraq's Next Government: What do the Kurds Want?" Time, 6 October 2010.
  8. "UPDATE 2 - Iraq's Shahristani retains hard line on Kurdish oil" Reuters, 10 October 2011.
  9. "Oil power struggle as US leaves Iraq" CNN ,12 December 2011.
  10. "Oil and gas contracts in Iraq Who's Who Legal July 2010.
  11. Fact Sheet: Iraq's Council of Representative Election" United Nations Assistance Mission for Iraq, 11 February 2010.
  12. "Oil and gas contracts in Iraq Who's Who Legal, July 2010.