For the first time the Iraqi federal budget for 2010 legislated Jan.26 includes allocations that will see the wealth redistributed among regions and governorates in a bid to make those who produce the oil benefit from it directly, while at the same time compensate them for the environmental damage suffered as a result of the oil and gas operations. That must be a first in the history of Iraq as an oil producing nation.
According to Article 43 of the 2010 budget law, the finance minister will transfer to the concerned governorates $1 for each barrel produced or refined and the same amount for each 150 cubic meters of gas produced in that governorate.
That means that Iraq’s biggest southern city of Basrah, home to the biggest oil fields in the world, and producing over 70% of Iraq’s oil output, would one day look like a rich city. At the moment, Basrah looks more like a city forgotten by history, except for the few recent individual initiatives that made an attempt to compensate for decades of neglect.
Just consider this: oil production from Basrah averages around 1.7 million b/d at the moment, throughput from its refinery averages just over 100,000 b/d and associated gas produced with 1.7 million b/d of crude amounts to 25 million cubic meters per day. So Basrah governorate will receive daily about $1.7 million for the oil it produces, $100,000 for the oil it refines and $160,000 for the gas per day. That comes to more than $717 million per year to spend on investments in improving services for its residents.
But that’s not all. Basrah will also get a further allocation from operating a border crossing with Kuwait and Iran as well as through the ports. That’s another stipulation in the 2010 federal budget that aims to yield more power to the provincial councils by increasing their financial muscle. Governorates operating border crossings will receive 5% of all fees and customs collected at borders, ports and airports.
It looks like the time has come for the inhabitants of Southern Iraq to finally reap the windfalls of the oil boom, especially as the new contracts awarded to international oil companies to develop the Rumaila, Majnoon, West Qurna and Zubair fields could theoretically yield some 10 million b/d. Rendez-vous in five years to see what will become of Basrah.