Iraqi Oil Ministry: KRG's contracts with oil companies violate the Constitution and waste public funds

Shafaq News/ Iraq's Ministry of Oil dismissed the production share contracts the Kurdistan Regional Government (KRG) has concluded with international oil companies as "unconstitutional" and detrimental to the financial income of the country.

"The Production Share Contracts (PSC) awards the contractor a share of the oil produced in the [Kurdistan] region. It also grants it full freedom to sell the oil at the time and place it finds suitable. This is contrary to Article 111 of the Iraqi constitution that stipulates that the oil and gas are a property of the Iraqi people," the Ministry said in a statement.

"The region allowed the international companies to take full control of the petroleum operations in accordance with the PSC they concluded," it added, "the region granted the contractors the right to sell its share of the produced oil and pay the government's share afterward. However, it should be the other way around."

"This means that the control is in the hands of the international companies; Which is contrary to Technical Service Contract (TSC), where all the oil is sold by the state oil marketer, SOMO, at the competitive prices that yield the most to the Iraqi people."

The Iraqi Ministry of Oil said that the model KRG has adopted (PSC) was more profitable to the companies at the expense of the government when compared to the TSC model.

"The revenues of KRG, after cutting the production costs, are less than 80%, While the first and second rounds' yields average between 49.5 and 96.5%, respectively," the statement continued, "the production costs are four folds higher in the KRG rounds."

The statement said that KRG had exempted the international companies investing in the region from taxes, which allowed them to multiply their revenues without sharing them, particularly when the prices in the international market soar, which violates the Tax law of 1982.

"The region did not commit to Iraq's share per the OPEC quota agreements, which impacted the shares of southern and Mid-Iraq fields and ultimately affected the financial revenues of the Federal Government even though it secures the salaries of the region's public servants."