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Iraq parliament passes bill to privatise refineries
PETROL POLITICS
Parliament Passes Law to Privatize Refineries
Measures Designed to Boost Iraq's Capacity, End Fuel
Shortages
By BEN LANDO
Essam al-Sudani/AFP/Getty area, 21 July 2007.
WASHINGTON, July 25 (UPI) -- Iraq's Parliament has
approved a law privatizing the country's oil-refining
sector in order to lure investment and stem a fuel
shortage.
The law, approved Tuesday, is a step toward
relinquishing government involvement in the refining
sector and, when poverty is alleviated, moving Iraqi
consumers from state-subsidized to market prices for
fuel.
Oil Minister Hussain al-Shahristani told United Press
International Wednesday from his mobile phone in
Baghdad that the government will provide incentives to
both domestic and foreign private oil companies whose
refinery plans the ministry approves.
"This is a law that will privatize the refining sector
in Iraq and allow the private sector, whether it's
local or international investments, to be able to
invest in refining activities in Iraq, including
building refineries," Shahristani said.
The refinery law is not the same as the highly
contested oil law, stuck in Parliament, which would
govern access to and development of Iraq's vast oil
reserves.
Despite its oil wealth, Iraq produces less than 2
million barrels per day -- compared with 2.6 million
bpd before the war -- and exports more than
three-quarters of it. That income covered more than 90
percent of the 2006 federal budget.
Demand for products such as gasoline, cooking and
heating fuel is being met by the maxed-out domestic
refineries -- which also suffer from sabotage, fuel
smuggling and electrical shortages -- and regular fuel
imports.
Earlier this month Iraq put out tenders for 1.3
million gallons of gasoline per day for the second
half of this year, as well as tenders for kerosene,
gas oil and other cooking and heating fuels. The
security situation has caused import problems in the
past.
In order to produce more fuel from Iraq's own oil
supply, Shahristani said the law allows the ministry
to offer private refineries "long-term supply of
required crude oil at discount price from the market
price on the day of supply." The price will be 1
percent below the price at which the State Oil
Marketing Organization is selling the oil.
Shahristani said the deal gets sweeter because
importers of Iraqi oil won't have to ship it to
refineries outside the country, but make fuels in an
established market.
"When you produce your fuel product in country you
will not need to import it from outside," Shahristani
said, though he also said the companies will be
"totally free" to export the fuel if they can make
more money doing it.
He said the law requires a certain percentage of Iraqi
workers to be hired for a given project, leading to
more jobs, more refining capacity and more fuel.
A company must submit a proposal to the Oil Ministry,
"either on their own or in partnership with one of the
Ministry of Oil companies," Shahristani said.
If approved, the ministry will also offer
infrastructure support, sweet land deals and
discounted utilities costs, he said, explaining such
projects have "reasonable profit margins but not very
large and investors have to be encouraged to come to
areas like Iraq to start their work."
Shahristani said it is not only the stark security
situation that's preventing investment, but Iraq is
"an evolving economy from totally centralized to free
market, and the economic system has not really
developed to a point" that investors are confident in
the safety of their investments.
The "new" Iraq as a free-market state isn't
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