The law, a copy of which was obtained by Reuters, would give Baghdad more power to manage and develop the OPEC member’s petroleum resources, the world’s fourth largest.
It alters a 2007 version agreed among political blocs that gave regional powers partial authority over their reserves.
The amendments are set to provoke a political fight between Prime Minister Nuri Al-Maliki’s government and the Kurds, who are part of his ruling coalition and wield considerable clout in the Iraqi legislature.
Iraq’s Arab-dominated central government, led by Al-Maliki, and the Kurdish region have for years disputed control of Kurdish fields. The row shut down exports from Iraqi Kurdistan from October 2009 to February of this year.
“We’re still giving space to discussions to resolve this issue. We have not reached the moment of opening fire on Al-Maliki’s government,” a senior Kurdish lawmaker told Reuters.
The amended law, approved by the Cabinet in late August, has been sent to Parliament for final passage, but the legislature’s speaker Osama Al-Nujaifi said talks to resolve the dispute could take a long time.
The amended law would give the oil ministry authority to hold bidding rounds for most oil and gas fields, leaving currently producing fields and discovered but undeveloped fields close to them in the hands of a newly created Iraqi National Oil Company (INOC).
The 2007 draft version restricted the ministry to auctions for discovered, undeveloped fields. The changes could result in the inclusion of Kurdish fields in future auctions, which the Kurds say they will not accept.
Kurdish and central government officials are discussing the amended law at high levels, and the Kurds have made clear they could review their support for Al-Maliki’s government if a resolution is not found, officials said.
The new oil law has long been considered vital to securing foreign investment to boost Iraq’s oil output, now at around 2.75 million barrels a day, and rebuild its shattered economy. International energy companies want a stable legal framework for oil and gas deals.
Iraqi officials have said petroleum resources belong to all sects and ethnicities in Iraq, and logically the central government should manage them. The Kurdish region and the provinces, particularly oil-rich Basra and Sunni-dominated Anbar, have argued for more local control.
The new draft calls for INOC to control coveted, already-producing oilfields — Kirkuk’s 2.3-billion-barrel Bai Hassan, and the 6-billion-barrel Nahr Bin Umar field in the south, for example.
The law would create a federal oil and gas council as the ultimate policy-setter. It would give the council power to approve policies proposed by the oil ministry, agree procedures for negotiating and contracting during bid rounds, and ratify drilling, development and production contracts.
The new law eliminates a clause that required the council to have Shiite, Sunni and Kurdish representation, and adds a clause reserving a council seat for the deputy prime minister for energy.
The Kurdistan Regional Government adopted its own oil and gas law in 2007 and signed more than 40 production-sharing contracts with foreign firms, which Baghdad deems illegal.
