A Clarification about INOC draft law:
The Council of Ministers (CoM) passed on July 28th by a majority vote a draft law for the re-establishment of Iraq National Oil Company “INOC”. A number of points were raised by the Shoura Council, Ministry of Finance, Ministry of oil and the Legal Directorate in the Council of Ministers Secretariat and a number of recommendations were made by the Advisory commission. All were attached to the draft.
To start, there is only one draft that was discussed and voted by the CoM, it’s the same text that was prepared by a high level committee established by the Council of Ministers Secretariat order and was entrusted with preparing a draft law. The Shoura Council studied the draft and hosted a number of senior Iraqi oil experts seeking their opinion and advice on a number of vital issues. The draft was sent back to the Council of Ministers Secretariat as it’s always the case with a number of valid recommendations such as limiting the approval needed from the Federal Oil & Gas Council “FOGC” to decisions taken by INOC Board of Directors to certain categories instead of all the decisions, in order to give INOC’s board of directors more freedom. Another recommendation was to increase INOC’s initial capital.
The draft law introduces a new concept which is that of INOC as a “holding company”. The reason behind that was to keep South Oil Co, North Oil Co and of course Missan Oil Co (the draft law was written before the establishment of MOC) as companies, or otherwise they would loose their status and become branches or divisions, or “organizations” as they used to be called before the introduction of Law 22 of 1997. This issue was raised in 2004 when the Shoura Council objected then to having INOC as a mother company owning operating companies. The concept of a “holding company” is not used in Iraq though it’s used in the states of the Arab Gulf and in Egypt. However, being a holding company doesn’t restrict INOC’s activities to owning stocks and supervising subsidiaries, because the new Law authorizes INOC to do much more than that as stipulated in Articles 4 and 15. INOC can form companies, carry out all sorts of oil operations from exploration down to marketing. In addition to that, it shall remain a state-owned company just like any other state-owned enterprise in Iraq.
The advisory commission recommended a number of amendments to overcome the dependence on legislating the Oil and Gas Law first due to the understanding that a package of four laws have to be passed together.
It’s to be mentioned that when a draft law is passed by CoM conditional with approved amendments, then such amendments would be attached to the text and sent to the Council Of Representatives.
Thamir A.Ghadhban
Baghdad 9th August 2009
One comment
Leave a Reply
You must be logged in to post a comment.
To start with I am not against the re-establishment of INOC and my following comments are meant to address the present context, i.e. the different times and conditions that we are now passing through and that are bound to impact the creation of INOC.
Though INOC is largely accepted as a positive action bringing a more coordinated order and momentum in Iraq’s ongoing efforts to develop its vast oil resources, it would have to be re-examined in the actual context and the roles and aims set for it, taking into consideration the changing environment. A number of impeding issues could in fact transform INOC’s meant-to-be positive role into the opposite of that. Not the least of those issues is the existing political and power sharing struggle between the federal bodies and the regional and provisional authorities. The new economic and political order in Iraq will have to move away from more restrictive practices to less restrictive practices and this essentially calls for less power invested in the hands of federal establishments.
INOC as envisioned will be impowered with more authorities than that of the ministry of oil regarding the upstream sector of the oil industry. Such enforced role will have adversories on the fedreal front represented by the ministry of oil, seening its dominant role taken away and also by local governments who are keen to have more say in the development of their natural resouces. Oil resources, in all parts of Iraq, is not just an issue of money to be shared, but it may be the only way of attracting foreign investments that would lead to the development of the local communities.
The alternative to creating INOC in my humble view is to treat each region or governorate as an entity on its own, to be coordinated by a federal body with much more enhanced power.
The question of recreating INOC and the centralization issue associated with it may have come at a much delayed time. The best that can be done now is to give more power to local oil companies and local authorities under some fundamental and a non-negotiable principle i.e. all revenues belong to the people of Iraq and that coordination and final deisions on oil and gas matters are the sole responsibility of a fedreal body, whether it’s the ministry, the Federal Oil and Gas Council, or any similar body such as INOC. Otherwise we will continue to turn in the same circle of the egg and chicken, and the creation of INOC will have the same fate as the oil and gas law.