5-17-13 SWFloridaGuy: I am encouraged by the progress we are witnessing on the Erbil front. History dictates that, although we are making progress, this is far from over. The dispute between the GOI & the KRG over the management of the natural resources and the allocation hydrocarbon exports is not a new phenomenon.
If Turkey allows the creation of new pipelines this will provide an alternative outlet to international markets for KRG-controlled resources beyond the existing export infrastructure under federal control promote the KRG's hydrocarbon wealth.
Negotiations over the oil and gas sector framework law and the revenue sharing law have stalled since 2007 due to the disagreements between the federal government and the KRG. In the absence of legislation clarifying jurisdiction over hydrocarbon exploration and development, the KRG passed its own oil and gas law in August 2007, which it claims is consistent with the federal constitution. The KRG has since proceeded to sign production-sharing contracts with international oil companies.
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Of course Baghdad disputes the KRG’s right to sign contracts with oil companies without its approval and in particular claims that, by offering oil companies excessively favorable terms, the KRG’s PSCs violate the constitutional requirement of developing oil and gas wealth in a way that yields the greatest benefit to the Iraqi people.
The improvement in Erbil-Ankara relations of the past few years reflects changes in Turkish domestic politics and also in the strategic environment. Among other issues this dispute between Baghdad and Erbil is mainly due to dissension over the revenues shares allocated to the KRG.
In particular, members of the Iraqi parliament aligned with Maliki have repeatedly tried to reduce from 17 to 12 percent the KRG’s share of the federal budget. The amount of federal payments to the companies under KRG’s contracts pumping oil through the existing pipeline was a source of contentious negotiations pertaining to the 2013 federal budget.
More recently, we are receiving reports that they may substitute a supplementary budget to solve this dispute. The month of June (possibly July) appears to be the target date for this agreement between the Federal Government and the territorial Government. My fear rests with their lack of ability to successfully pass the amendments they publicly declare in order to conciliate their opposition and placate the demonstrators with a charade of political synergism.
This modification to the budget law will require a vote in the CoM and the referred to the House for the 1st and 2nd reading, at which point they will vote. For the first time in years I'm letting myself believe that this 7 item agreement could finally be a genuine contingency possibly leading to a final resolution. It's a propitious opportunity where each side will benefit along with foreign companies operating in the territory and the Iraqi citizens themselves for change.
We've all been here before and heard these promises. However, sooner or later these issues must be resolved and now is as good a time as any. But like most investors, I'm waiting to see actual results before I celebrate. Although, it's hard to argue that the news of late seems to be convalescent compared that of years past. These are just my opinions, which may or may not be correct.