Iraq has made another attempt to control revenues from the semi-autonomous Kurdistan region by requiring oil and gas companies operating there to sign new contracts with state-owned distributor SOMO rather than the Kurdistan Regional Government ( KRG).
Oil Minister Ihsan Ismael said May 7 that Iraq’s Oil Ministry would begin implementing a February Federal Court ruling that found the legal foundations of the Kurdistan region’s oil and gas sector unconstitutional.
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A letter seen by Reuters shows the Oil Ministry has appointed international law firm Cleary Gottlieb Steen and Hamilton to approach certain oil and gas companies operating in the Kurdistan region to ‘initiate discussions to bring their operations into compliance with applicable Iraqi law”.
Implementing the court ruling “will require changes to the contractual regime” for businesses, the letter adds. Other companies have received a letter directly from the oil minister, a source said.
The KRG repeatedly rejected the Federal Court’s decision.
The letters, which were sent on May 8, mark the first direct contact between the ministry and oil companies operating in the Kurdistan region. The move follows years of attempts by the federal government to control ARK’s revenue, including local court rulings and threats of international arbitration.
The implications of this latest decision are not entirely clear because more than seven months after the elections in Iraq, the formation of a government is still in progress.
A legal adviser to Iraq’s oil ministry, who spoke on condition of anonymity, told Reuters that a joint government committee comprising representatives of the oil ministry, including the minister, the Iraqi National Oil Company (Inoc) and the Federal Board of Supreme Audit (FBSA) will conduct a contract review.
The aim is to eventually sign contracts with the central government and not with the KRG, added the adviser.
Foreign oil companies with a presence in the Kurdistan region, including Genel Energy, Chevron and Gulf Keystone, and Cleary Gottlieb, declined to comment, while Iraq’s oil ministry and oil and gas company DNO did not immediately respond to questions. requests for comments.
The oil ministry has not yet received responses from the affected companies and may take further legal action if there is no response, an oil ministry official said, without giving further details.
Foreign oil companies are unlikely to engage directly with Baghdad without coordination with the KRG, an oil company representative told Reuters.
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