Restructuring and Re-organization of the Iraqi Oil Ministry and State-owned Oil Companies for Maximum Economic Growth and National Development

The first steps towards restructuring and reorganizing the institutions and legislation of the Iraqi oil and gas industry must include taking ownership of resources, allocating acreages to Iraqi Kurdistan and neighbour states, improving the transparency as well as governmental participation and fiscal principles. It is important to provide an institutional framework that governs the operations of the industry, including its functions, structure, powers and funding. Operations in the upstream of the industry comprise licenses, leases and contracts. Other considerations covered are award processes, right of governmental participation, marginal fields, indigenous companies, termination and revocation of both licenses and leases, matters on fees, rents and royalties and, finally, provisions on Associated Natural Gas. The legislation in the downstream sector focuses on licensing, refining, marketing and pricing of oil products, transport logistics and facility management companies, pipelines and depots. The operating stocks and Iraq strategic stocks are also necessary. The needs of the downstream natural gas include both technical and commercial licensing regulations and conditions, as the network, gas supply licenses, transportation pipelines licenses and the whole sale market in addition to the possibility of third party access, customer protection, the pricing regime, public service obligations, competition and market regulation. The legislation is an amendment to the existing Iraqi Technical Service Contracts (TSC) and Production Sharing Contracts Agreements (PSC) in Iraqi Kurdistan based on the need to create a new fiscal framework that takes various compelling issues into consideration. It needs to capture the full gas value chain for taxation purposes in order to develop a fiscal regime for gas removed from oil and to create thereby a level playing field for all investors in gas and promoting the effective management of costs across the industry, which in turn will maximize the government’s take. Other considerations revolve around the requirement to develop a fiscal system, which responds to changes in price, and to clarify inconsistencies or conflicts in the application of fiscal terms for oil and gas; and, finally, to develop a fiscal rule of general application based on a body of expected fiscal laws. Quality, health, safety and environment are missing elements in Iraq. During the restructuring and reorganization of the institutions the QHSE should take on a major role in working with the aforementioned departments in the Oil Ministry and the operating companies. The obligations of the state and international oil companies towards the state environmental regulations and public rules must be upheld according to the licensees, lessees and contractors considering matters of abandonment, decommissioning and disposal and their funding. The various actors in the oil and gas production are obligated towards various communities in the oil-producing region of the country, with supporting community development, providing employment opportunities, compensation, infrastructure, protection and management of the environment as essential components. The Ministry of Oil remains a civil service outfit that is ill-equipped to conceive and enact the required policies for such a complex and sophisticated industry. Hence, there is a strong need for principal and basic interaction between Federal Oil Ministry, existing directorial and state oil companies, Kurdistan Ministry of Energy and Natural Resources, and private sector operatives. This applies also to the reorganization and restructuring of Federal Oil Ministry, existing directorial and state oil companies, Iraqi National Oil Company and Iraqi National Gas Company.