Iraq needs oil policy before negotiating with majors: Chalabi

Vienna (Platts)--31Jan2006

Iraqi oil production is still suffering from the effect of sabotage and
problems with its reservoirs but the entry of oil majors into the country to
develop oilfields cannot proceed before parliament approves an oil policy,
Deputy Prime Minister Ahmed Chalabi said Tuesday.

     Chalabi, who spoke before the start of an OPEC meeting in Vienna, said
the interim government was not in a position to negotiate any contracts until
a new law was approved, giving a new government a mandate to negotiate
contracts.

     Iraq's oil industry was suffering from "sabotage, a loss of maintenance
and a lack of investment...but we have taken steps to fix the security
situation," Chalabi said without elaborating.

     Asked when Baghdad expected international oil companies to return to Iraq
to help raise production capacity, Chalabi noted that this would have to await
the passing of legislation that would allow a new cabinet to negotiate with
foreign companies.

     "There is a lot of interest," he told reporters. "But any agreement has
to be approved by parliament. There is no government authorized to make any
agreements and an oil policy has to be passed."

     "We expect to pass the legislation and then go to the international
market," to seek deals, he said.

     Iraqis went to the polls in December to elect a new parliament that is
supposed to draft a permanent post-war constitution for the country.

     Sabotage and violent attacks against oil infrastructure and oil personnel
since the end of the US-led war on Iraq have deterred international oil
companies from seeking development contracts and have pushed back plans by the
interim authorities to raise production capacity from just under 3-mil b/d.

     Iraqi crude production has fallen below 2-mil b/d in recent months as a
result of the persistent attacks on its infrastructure, weather-related
disruptions and the lack of storage. Oil exports from the north remain
suspended and Chalabi gave no indication when crude oil sales through the
pipeline to Turkey's Mediterranean port of Ceyhan would resume.

     Chalabi was until Monday acting oil minister. Prime Minister Ibrahim
Jaafari has named Hasham al-Hashami as the new acting oil minister until a new
government is formed after replacing Ibrahim Bahr al-Ulum, oil ministry
sources told Platts Tuesday.

     Asked who controlled Iraq's oil reserves, Chalabi said the draft
constitution made it quite clear that the oil belonged to the "people of Iraq"
while policy would be coordinated between the oil provinces and the central
government as outlined in Article 109 of the draft constitution. "Oil is for
all the Iraqi people," said Chalabi.

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