By BEN LANDO, NIZAR LATIF and ALAA MAJEEDIraq Oil Report
17 July 2009
The leadership of Iraq’s most prominent oil union says the government should not as quickly turn to foreign firms in developing fields already producing oil, blaming politicians for stalling progress in Iraq’s oil fields.
Signing international oil companies to produce oil in undeveloped fields is nominally OK by the unions – including the second bid round for 11 fields – but not those that Iraqi workers and state oil company is already pumping from.
And there are warnings from the workers that the BP-Chinese National Petroleum Corp. award for the giant Rumaila field could face physical resistance.
“We think that these contracts are illegal and illegitimate,” said Hassan Juma’a Awad, president of the Iraqi Federation of Oil Unions.
The workers fear they’ll be out of jobs when foreign firms come in. And they see the return of the foreign firms that once ruled Iraq as a petro-province as a potential threat to Iraqis benefiting from the massive fields.
While Awad was more subtle when asked what comes next, saying union meetings were held but decisions have yet to be made, IFOU General Secretary Faleh Abood Umara said “the union will arrange protests and strikes if the foreign companies have entered Basra.”
The ministry this week warned the unions would face repercussions for obstructing work. It also said companies were told at least 85 percent of their workforce must be Iraqi.
The six fields offered in the June 30 auction – the Rumaila field to BP the only one awarded – are all producing oil and are Iraq’s largest. Both the unions and officials in Iraq’s state-owned South Oil Co. have objected to the 20-year contracts on offer. They say the government should have directed more money much quicker to allow the state company to fix the infrastructure – damaged by wars, sanctions and misuse since the 1980s – and increase production.
“We blame the Ministry of Oil for the current situation,” Awad said. He added that delays in state investment has led to the government, quickly needing more cash for reconstruction, to invite foreign oil firms without better standing up the state companies.
Iraq has the world’s third largest oil reserves and, although production and exports are increasing , there’s potential for much more. Iraq earns around 95 percent of state income from oil sales – nearly $62 billion last year – and lower prices and a worse economy are putting pressure to quickly boost production.
The unions have said there is a role for foreign firms in Iraq oil production. But they want a balance between the need Iraq has for modern techniques, training and equipment and the desire to keep Iraqis in control of Iraq’s oil.
Foreign firms in turn seek a balance between the massive rewards Iraq’s oil offers and the political, legal and security risks, one of the reasons Iraq only awarded one firm a deal during the auction.
“What we want from the foreign companies is to give their efforts to serve the interest of the Iraqi people and not to just increase the oil production or develop the oil fields,” Awad said. He also said the appropriate laws are not in place to ensure the legality and transparency of the contracts.
“We oppose the position of the (Ministry of Oil) that signed the contracts, but we also oppose the position of the foreign companies that signed illegitimate contracts without looking for gaps such as the role of the oil union,” Awad said.
Iraq’s oil workers – and those in many other fields – are legally prevented from forming unions, based on remaining Saddam Hussein-era laws. The workers have organized nonetheless and at times hold much sway.
The oil unions have protested working conditions including pay and housing, and coupled with opposition to the draft oil law they viewed as too open to foreign investment, have even stopped production. The Oil Ministry has instructed its state oil companies not to deal with the unions – an impossible order – and has come down hard in the past. In June 2007, striking workers in Basra were surrounded by the Iraqi military and arrest warrants were issued for union leaders.
The 2005 Constitution calls for new labor laws – in the same language it calls for new hydrocarbons legislation – but the government has yet to act, a major complication considering how the two are intertwined.
“Such marginalization could cause many problems with between these unions and the foreign companies,” said Awad. He said a new labor law would not only solidify the rights of workers, but ease the entry of foreign firms.
Iraq has also yet to pass a new law to replace the oil regulations from Saddam Hussein, who consolidated power, shut down the Iraqi National Oil Co. (INOC) and folded all state firms into the Oil Ministry. Since 2003, Iraq’s national politicians have fought over the new oil law – stuck in disputes over the role of foreign firms and whether regional and provincial governments should have oil authority – and the related revenue sharing law and legislation to reorganize the Oil Ministry and reconstitute INOC.
Meanwhile, Iraq’s Kurdistan Regional Government (KRG) passed a regional oil law and signed two dozen oil deals, which the central government has called illegal and added to the roadblocks for the future of Iraq’s oil sector.
All of this led to complaints leading up to the June 30 auction, some on technical issues, others political. Aside from the South Oil Co. and the unions, the KRG has called it unconstitutional and Parliament is demanding it get to approve any deal.
Which leaves unresolved the evolving dispute over Rumaila.
“The Rumaila agreement would violate Iraqi law that has been reached in the absence of a national energy law, which has been delayed approval because of political differences,” said Ali Abbas, who heads a union office in Basra. “The union is able to mobilize people against it, because the presence of these companies is contrary to the laws.”
