The Truth About Iraq’s Hydrocarbon Law
Ever wonder about the hydrocarbon law? Consisting of a set of four laws which outline how the oil industry should be governed, how the Iraqis will divide the profits from this industry, and how the oil industry should be re-shaped.
These four laws define, respectively, how the Iraqi Ministry of Oil should be re-structured, how investments in the oil industry should be managed, how revenue should be distributed and divided, and how the Iraqi National Oil Company should be reconstituted.
These laws are necessary for the permission for international companies to begin investing in the Iraqi oil industry (and to subsequently jump start the oil production industry), as they provide the guidelines, regulations, boundaries, etc. for how to run this industry.
Whether or not the hydrocarbon law is beneficial or detrimental to the Iraqi government and economy is widely discussed, with many disagreeing on its actual benefits for the Iraqi people overall.
The four laws are as follows
1.) Managing investment in Iraq’s oil resources, specifically the industry’s upstream development;
2.) Revenue sharing among private companies, provinces, and the federal government;
3.) Restructuring the Ministry of Oil; and
4.) Create and constitute an Iraq National Oil Company (INOC) to control all aspects of the Iraqi oil industry.
This includes managing investment by Iraq’s various factions and tribes in a controlled manner, and eliminating previous warring and feuding for control of oil in various provinces. Also including management of investments (including granting of contracts and acceptance of bids for developing oil fields) by foreign companies and firms as well as Iraqi national firms.
In terms of managing Iraq’s various factions and tribes this law states that the oil industry will be managed by the federal government rather than by each province’s regional government. Each province and faction to be given a portion of the oil industry profits, with the amount of revenue received being in proportion to the population of each province.
In terms of managing foreign investment, this law states that foreign companies will be given national treatment when bidding for or applying for a contract to develop in Iraq’s oil fields. That they must be given equal preference as Iraqi national companies, and that the Iraqi government can not favor Iraqi companies when granting contracts.
Due to Iraq’s decaying infrastructure in its oil industry, foreign investment is needed and is quite necessary; however, there is disagreement as to how the involvement and investment of foreign companies should be managed.
Whether or not it can be managed fairly as to still allow the Iraqi government control over its oil industry, and whether or not foreign companies will eventually control this entire industry. Some believe that creating an equal balance between Iraqi and foreign companies is indeed possible.
Foreign investment will not only repair the infrastructure, but also jump start the industry and increase the overall revenue from this industry. Maximizing the industry’s profits and potential should be in check. Others, however, believe that sharing with foreign companies is not possible, as they will unfairly undermine Iraq’s overall control of their oil.
Some believe that sharing the profits among all of the provinces will result in less feuding over oil control. All provinces following this law will create a calmer, more democratic society and government.
Others believe that with foreigners having some control and share in the profits of this industry, this will anger some provinces. Such angry provinces may believe that they are losing a portion of the profits that should be rightfully theirs. This can result in escalating civil war, feuding, and hostility towards foreign companies and foreign presence thus creating more uncertainty for Iraq Dinars stability and growth potential.
“Keep in mind that what some believe is not necessarily occurring in reality” -DrDinar.com Operations
These same people also believe that foreign companies will gain increasing levels of control, and may possibly gain total control eventually. With this increase will come greater levels of dissatisfaction among the various factions and provinces, all of which will contribute to escalating levels of violence, warring, and faction.
Revenue sharing must be defined and agreed upon by both the federal government and individual provinces. As well as the inclusion of foreign companies; the current revenue share plan in place does give some of the revenue to individual provinces.
More must still be defined in terms of privatization vs nationalization in terms of profit sharing, or distribution of revenue. Different provinces and sects favor different forms of revenue sharing, with provinces in possession of the most oil fields and resources wishing for provincial government and authority over these. As well as revenue to be distributed according to each province’s resources.
Provinces with less resources favor federal, centralized, and more shared revenue distribution by government. Equal and agreed upon profit sharing among all of its various provinces and sects is critical to stabilizing the country among its various provinces and sect.
Nationalization or Privatization in Iraq
Nationalization of this industry, rather than privatization (the investment of foreign companies), is generally favored. Restructuring of this federal governing body would give it more control and power in passing, defining, and regulating laws regarding the oil industry.
Establishing this company can and will increase the Iraq government control of this industry. Iraq Government control of the industry assumes Iraq’s Government has 100% independence militarily.
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activated. This article is written by Darren Chabluk from