September 2003: Iraqi Prime Minister Issues Oil Policy Guidelines Favorable to Private Interests

Iraqi Prime Minister Iyad Allawi provides the Supreme Council for Oil Policy with a set of guidelines upon which the council is to base its petroleum policy. According to the guidelines, fields currently in production should continue to be developed by the Iraq National Oil Company (INOC), but development of all other fields should be contracted to private oil firms through production sharing agreements (PSAs). Eighty oilfields are known to exist in Iraq, but only 17 of them are currently being developed. Under the policy advocated by Allawi, the remaining 63 would be operated by the oil companies. New fields, according to Allawi, should be developed exclusively by the private sector. [Deutsche Presse-Agentur (Hamburg), 9/13/2003; Agence France-Presse, 9/26/2003; Muttitt, 2005] One critic of this proposed policy will later note that since Iraq’s 17 known fields “represent only 40 billion of Iraq’s 115 billion barrels of known oil reserves, the policy to allocate undeveloped fields to foreign companies would give those companies control of 64 percent of known reserves. If a further 100 billion barrels are found, as is widely predicted, the foreign companies could control as much as 81 percent of Iraq’s oil; if 200 billion are found, as the Oil Ministry predicts, the foreign company share would be 87 percent. Given that oil accounts for over 95 percent of Iraq’s government revenues, the impact of this policy on Iraq’s economy would be enormous.” [Muttitt, 2005] Another one of Allawi’s recommendations is that the INOC should be partially privatized. Allawi also feels that Iraqis should avoid spending time negotiating with the oil companies, and instead agree to whatever terms the companies will accept, with a possibility of renegotiating the contracts at a later date. [Deutsche Presse-Agentur (Hamburg), 9/13/2003; Agence France-Presse, 9/26/2003; Muttitt, 2005]