Questions About Fairness May Delay Iraq-Shell Gas Deal
In the heightened political climate surrounding Iraq's upcoming election, lawmakers and others in Iraq are criticizing the country's pending natural gas deal with Shell Oil, saying that it offers lopsided benefits to the international oil giant and that it was drafted without adequate transparency or oversight.
The preliminary "agreement to agree," signed almost a year ago, envisioned a deal in which Shell would control natural gas rights to all major fields in the petroleum-rich Basra province. But, as Business Week reported on September 8, members of the parliament's oil and gas committee say that such a deal would "allow Shell to monopolize natural gas resources and influence prices."
Based on a review of Iraq's preliminary deal with Shell, Revenue Watch believes the 2008 "Heads of Agreement" document could deny the Iraqi government the full ability to develop its own gas sector in accordance with its fundamental public policies.
The agreement, as initially sketched out, could hand most of the financial upside to Shell, and also provide too little gas for public consumption within Iraq, even though the latter was ostensibly a key goal of the agreement.
Iraq's lucrative and massive oil sector has continued to operate in a hobbled state, due not only to broken infrastructure but also to the long absence of hydrocarbon legislation to govern fiscal terms, revenue management and power-sharing between the central government and the oil-rich Kurdish regions.
The likely delay to the Shell deal comes in the wake of a disappointing round of bidding by international oil companies this summer, when only one of eight fields on offer was successfully auctioned, due to a scarcity of bids and to wide discrepancies between bidders and the Iraqi government over proposed fiscal terms.
Read Revenue Watch's full commentary on Iraq's 2008 "Heads of Agreement" document ... (pdf, 155 KB)
LEARN MORE
- Developing the Iraqi Gas Sector: Critical Issues for A Way Forward (pdf, 156 KB)
- COMMENTARY: To Succeed, an Iraqi National Oil Company Needs an Iraqi Oil Law
- Iraq May Delay Shell Gas Deal Until 2010—Official (The Wall Street Journal)
- Iraq-Shell Gas Deal Likely to Be Delayed (Business Week)
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