Iraq's Petroleum Industry - Unsettled Issues

8/13/2019 Iraq's Petroleum Industry - Unsettled Issues

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Special Edition

Iraqs Petroleum Industry:

Unsettled Issues

The Middle East Institute

Washington, DC


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2 Middle East Istitute Viewpits: Iras Petrleum Idustry: Usettled Issues www.mei.edu

Te mission o the Middle East Institute is to promote knowledge o the Middle East in Amer-

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Middle East Institute


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3Middle East Istitute Viewpits: Iras Petrleum Idustry: Usettled Issues www.mei.edu

Viewpoints

Iraqs Petroleum Industry:

Unsettled Issues


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Iraqs Petroleum Industry:Unsettled Issues

Viewpoints

Preace 5

Introduction, by mas W. Dva 6

Iraqs Oil Bid Rounds: Politics and Pitalls,by Saifaldi D. Abdul-Rama 9

Political and Legal Obstacles in Iraq,by Nicholas Skibiak 12

Te Status o Forces Agreement and Investing in Iraq:Risky Business?by Adrew L. F 15

Charts & Maps 18


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Preace

Iraq has the worlds third-largest oil reserves. However, the development o Iraqs petroleum sector has been severelyhampered by decades o war, sanctions, underinvestment, the exodus o scores o technocrats, and sabotage. Repair-

ing Iraqs oil inrastructure and expanding exploration, development, and production is o paramount importance tothe countrys uture. In June 2009, the Iraqi Oil Ministry embarked on an effort to help meet this challenge by offering

service contracts to international oil companies (IOCs) in two rounds o tenders. Te essays contained in this special

edition o MEI Viewpointsexplore the official expectations and current status o the contracts awarded to IOCs. Tey

also provide a sober assessment o the legal and political obstacles yet to be overcome, as well as sage advice as to how

those seeking to invest in Iraqs petroleum sector can minimize the hazards o doing business there.

MEI wises t tak Mr. mas W. Dva, w played a istrumetal rle i all pases f te develpmet f tis

publicati.


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Introduction

mas W. Dva

With the recent conclusion o the first and second bid rounds to license oreign in-ternational oil companies (IOCs) to operate in specific Iraqi fields, many commentators

have predictedthat the country is now on its way to meeting the very ambitious 12 mil-

lion barrel per day (bpd) oil production benchmark. In making such predictions they

cite the diminished violence in the nation, the seemingly ree and air 2010 elections,

and especially the better organized 2009 bid rounds which granted IOCs the ability to

develop petroleum in a profit sharing capacity.

While all o us involved in Iraq want the best or the Iraqi Government and its people

who have endured so much it is difficult to overlook several major obstacles in the

upstream petroleum industry. A viable and dependable upstream production cannottake hold in Iraq without clear and timely resolution o several integral issues. Tis spe-

cial edition o Viewpoints, which I am pleased to moderate, seeks to isolate these issues,

understand them in a domestic and regional light, and offer pointed assertions by lead-

ers in their field on how to improve the upstream production and domestic off-loading

capacity. Te stakes could not be higher: the uture o stable worldwide petroleum

production and the ability to und a democratic Iraq hang in the balance.

ThE PRIzE

According to dated publicly available surveys, there are 28 giant fields in Iraq, which

hold an estimated 12% o the entire proven global reserves. Discovered as early as the

Ottoman Empire, the largest giant field is Rumaila, located near Basrah in southern

Iraq. Te giant field o Qurna (also called West Qurna or Qurna I & II) is also located

in the Basrah Governorate. Te Majnoon field in the north is the third largest giant in

Iraq. Each o these fields is estimated to be between the 3rdand 9thlargest fields in the

world.

Te extraordinary size o these fields and their highly sustained productivity are due to

a nearly perect combination o a large subterraneous geological structure and a highly

permeable reservoir. Tese special sedimentary properties make the ultimate recovery

(ability to extract a high percentage rom the giant field) and success rate (defined as the

number o successul wells completed as divided by the number o wells drilled) among

the highest in the world. Moreover, the proximity o these giant fields to a usable port

or offloading via pipeline in Umm Qasr (located on the Persian Gul in the disputed

mas W. Dva is

a corporate attorney andpartner in the Iraq LawAlliace, PLLC. he maybe reached at [email protected]

Te views expressed in these Viewpointsare those o the authors; the Middle East Institute does not take positions on Middle East policy.


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Shatt al-Arab waterway) is small as compared to other giant fields in the North Slope o Alaska or Central Asia. Tis

proximity to a port, high success and recovery rate, along with the superb geological properties o the petroleum itsel

contributes to a highly lucrative prize or any IOC willing to engage in the sizeable risks associated with an Iraqi investment

Understandably, this prize has brought serious international competition. O the 21 bidding

consortiums involved in the 2009 petroleum bidding, 17 involved Chinese parties. Once

added to overall demand rom mainland China, Chinese corporate interests are now the

largest oreign investor in Iraq and the largest developer and consumer o upstream petro-

leum in Iraq as well as the largest recipient o petroleum rom the Middle East.

PoLITICAL AnD LEGAL ConSIDERATIonS

Notwithstanding the ultimate prize o Iraqi upstream production, there remain several

legal and political risks which cannot be ignored. Tese risks remain, as with everything in Iraq, disproportionately high

as compared to other developing democracies. Specifically, such issues as security concerns, Kurdish political disputes

the dubious legal structure o the petroleum regime itsel, and legal inconsistencies with the production sharing con-

tracts signed by IOCs in the 2009 bid rounds add to the legal and political risk.

Any discussion o the development o the Iraqi petroleum industry cannot underestimate the differences in legal treat

ment between the areas o ederal Iraq and the semi-autonomous area under the rule o the Kurdistan Regional Gov-

ernment (KRG). Despite the 2005 ederal Iraqi Constitution which has ambiguous language to the contrary, the KRG

today ormulates and governs upstream petroleum production in the provinces under its control; namely Dohuk, Erbil

and Sulamaneiyah. In a possible contravention o law, all licensing, monitoring, and production sharing is conducted by

and between the KRG and the IOCs.

Te KRG issued a parsimonious petroleum law well beore it began production in 2009, granted concessions in a profit

sharing capacity with oreign operators, and has today many large international petroleum corporations actively op-

erating within its borders. While the production and development is still in the early stages, the international corpora-

tions have a vested interest in the development and urther estrangement o the KRG rom the rest o ederal Iraq. Te

producing fields in the KRG are smaller than the giant fields in ederal Iraq. Granted, the ederal government believes

that the KRG is overstepping its bounds and cites the clear provisions o the 2005 Constitution in support. However, as

these Kurdish political actions are needed to create a workable majority in Iraqs Parliament and thereore orm a ed-

eral government, there exists no ultimate deterrence or their actions. In the absence o such, the KRG has aggressively

pushed orward in developing, marketing, and exporting its own reserves.

Unlike the KRG, ederal Iraq has been acting without a parsimonious oil law since the current sovereign Governmen

o Iraq has been in existence. Te environmental and legal underpinnings o upstream production are instead grounded

Dva...

According to datedpublicly availablesurveys, there are 28giant fields in Iraq,which hold an es-timated 12% o theentire proven globalreserves.


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in the laws which remain in orce rom the previous Saddam Husayn and General Qasim regimes. Tese authoritarian

and socialist structures created a nationalist monopoly on the production, transport, and export o oil, and only allowed

the involvement o oreign companies i the Iraqi Parliament specifically allowed such activity (Law 97 o 1967). In the

absence o a direct approval by Parliament, and incorporating a strict interpretation o Law 97, each and every IOC in

Iraq successul in the 2009 bid rounds would need a specific vote in Parliament to be

operating in Iraq legally. I there is no such authorizing vote, their presence is arguably

illegal under Iraqi domestic law or operating in an ultra virescapacity. Tis dubious

legal structure has dissuaded many supermajor petroleum companies rom investing

in Iraq and participating in the bid rounds.

Tis gap in Iraqi jurisprudence has recently been challenged in ederal Iraqi court by

ormer parliamentarian Shadha Musawi. She argues that the Prime Minister and the

Oil Minister had begun, without Parliaments approval, to decide the nations petro-

leum policy through their licensing efforts in the first and second bid rounds. Musawis

contentions are that oil policies, contracts, and licenses should be approved in greater

concert with the regional governorates (which includes her native Basra Governorate)

as well as the ederal Parliament. In Musawis view, and in a strict and literal reading o Law 97 o 1967, all contracts

between Iraqs Ministry o Oil and any third parties must obtain a separate vote o approval rom Parliament to prove

binding, legal, and enorceable under Iraqi law. Te case is now pending in a Baghdad ederal court. Its potential success

on its merits is keenly watched by international observers.

One o the most interesting aspects o the growth in the upstream petroleum production is that internal refining and

distribution capacity within Iraq has not developed significantly. Still operating on a pre-war level, the increase in inra-

structure development consistent with the sheer massive oreign investment ollowing the bid rounds will undoubtedly

grow. Te opportunities or oreign investment in this sector will also be large and keenly competitive between Ameri-

can, European, and Chinese interests, among others.

CONCLUSION

Te current chapter in Iraqs modern history will ultimately be judged by the capacity and pace with which it re-engages

its Middle East neighbors and immerses itsel in the rapidly changing global economy. While always a steep road to

plough, it will be markedly more difficult without a clear resolution o the legal and political issues herein presented as

well as the internal political and bureaucratic obstacles which exacerbate the enormous risks associated with any Iraq

investment. Tereore, I am pleased to introduce this special edition oMEI Viewpoints. As always, the authors welcome

readers contributions and eedback, which undoubtedly contribute to the greater understanding o these issues and

how they present themselves in our interconnected world.

Dva...

Any discussion othe development othe Iraqi petroleumindustry cannotunderestimate thedifferences in legaltreatment betweenthe areas o ederal

Iraq and the semi-autonomous areaunder the rule othe ... KRG.


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Iraqs Oil Bid Rounds: Politics and Pitalls

Saifaldi D. Abdul-Rama

Saifaldi D. Abdul-RamaisVice President o IWG a US

/ Iraqi firm providing consult-ing, logistics, and construc-ti wrk i Ira. he is als aparter i te Taj Al-Kairat

Grup fr Ivestmet. he asheld senior posts in the Iraqi

government, including asAdvisor to the Vice Presidento Iraq (2009), Chie o Staffto the Speaker o Parliament

(2005), and Chie o Staff tothe Minister o Industry &Mierals (2004).

he first rounds o bidding to develop Iraqs oil fields were perceived to have been aailure because only the BP-led consortium accepted Iraqs bid parameters. However,

the second round with seven groups o international oil companies (IOCs) eventu-

ally signing contracts to develop fields and two more deals rom the first round signed

was a success. Tis represented a major breakthrough not only or Iraq (particularly

because the terms negotiated are very avorable to the host government), but also or

Iraqi Oil Minister Husayn Shahristani, who almost singlehandedly pushed the licensing

round policy. Nevertheless, some potential problems lie ahead.

ThE ConTRACTS

Te major fields and the companies that will develop them are:

Rumaila BP / CNPC

Qurnah 1 ExxonMobil / Shell

Zubair ENI / Oxy / Kogas

Majnoon Shell / Petronas

West Qurnah 2 Lukoil / Statoil

While these fields represent a majority o Iraqs discovered and producing acreage, it

is important to point out that most o the fields awarded are located either in Basra

Province or one o the surrounding southern provinces. Tis has several noteworthy

implications. First, the residents o these provinces will be looking to the oil companies

to provide jobs and to return some o the oil production earnings to them. Yet, con-

trary to the residents perceptions, the contracts are structured so that the companies

will merely improve production, leaving all o the other financial details to the central

government. Furthermore, the Iraqi central government wants to limit the amount o

money that is allocated to these oil-producing provinces in avor o ederal projects.

POTENTIAL PITFALLS

Discontent may spread among the residents o Iraqs oil producing provinces, who are

likely to eel cheated not only by the ederal government but also by the IOCs. In act,

this scenario has already started to play out at Alahdab field, where local residents say

that the Chinese have not hired anyone locally and have brought in their own workers.



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Abdul-Rama...

Te persistence or intensification o this discontent is problematic at two levels. At the micro level, the disgruntlement

could lead to instability, as has occurred in the Niger Delta region o Nigeria. At the macro level, the issues are more

numerous and complex. At the top o the list is the absence o a legal ramework or apportioning the revenues accrued

rom oil production. Impeding efforts to establish this ramework are the competing concerns o Iraqs three main eth-nic/sectarian groups: the Sunnis, who still eel that they have no stake in the new Iraq or its oil; the Shia, who eel that

they do not receive enough o the oil revenues; and the Kurds, who are wrangling with

the central government over their rights to produce and sell oil. Tis contention over

the hydrocarbons law and revenue sharing stems rom the act that there is not yet an

agreed upon social contract binding the state together. Put differently, Iraqis have yet to

agree on the most undamental o state unctions and where sovereignty lies. Te stakes

will only be higher as oil revenue begins to increase and as some regions and provinces

begin to develop more rapidly than their neighbors. Whether they know it or not, many

o the major oil companies are now at the center o this potential maelstrom.

Te second major issue is what is likely to be a disparity between promises and results. Iraq has embarked upon one

o the most ambitious oil development plans in history. Iraqi Oil Minister Husayn Shahristani has declared that Iraqs

production would reach six million barrels per day (bpd) within three years and over ten million bpd within seven

years. Most analysts do not believe that these goals can be attained. However, setting such overly ambitious goals risks

creating unrealistic expectations which, i unulfilled, are apt to cause peoples confidence in the central government to

erode. Some political groups (e.g., the Sadrists) might exploit the situation by omenting unrest in order to undermine

establishment politicians.

Setting unrealistically high oil production goals also unnecessarily antagonizes Iraqs neighbors, particularly Saudi Ara-

bia and Iran, adding a new dynamic to the already complex relationships between the three countries. Were Iraq to

reach the six million bpd threshold, it would begin to challenge Saudi Arabias role as OPECs leading producer. Reach-

ing that threshold also would complicate Iraqs relationship with other OPEC members, which might seek to limit Iraqi

production because o price concerns. Whether Iraq will accept such limitations, given the years o sanctions and lack

o investment in the oil sector, is an open question.

Equally uncertain is the role that Iran might play should the situation in the Gul deteriorate. For example, in the event

o a military strike against Iran, the possibility o Iranian retaliation against Western oil interests (i.e., oil companies

operating near its border) cannot be ruled out.

Finally, Iraq has yet to finalize all o the legal rameworks associated with signing the development contracts with the

IOCs. Nor do its laws adequately address some o the questions raised in the Iraqi Council o Representatives. What i

a new prime minister or Council o Representatives seeks to change or dissolve the contracts that have already been

Iraqis have yet toagree on the mostundamental ostate unctions andwhere sovereigntylies.


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signed? Tis issue is particularly important now that the Sadrists have a significant bloc in the Council and historically have

sought to undermine the Oil Minister and the contracts he promulgated, which they believed were not in Iraqs best inter-

ests.

ThE WAY FoRWARD

While the aorementioned issues are numerous and complex, international oil companies can take steps at the local level (i.e.

in Iraqs southern provinces) and Iraqs central government can adopt measures at the national level to address them.

Te central government must initiate an education campaign highlighting the role o the IOCs in Iraq and the need or

the technology and investment they bring in helping to develop Iraqs fields. Tis must be coupled with a transparent

policy that spells out precisely how much o the revenues will be returned directly to the producing provinces. Te IOCs

can, and should, help Iraq reach this target, not by directly talking to Iraqs government, but by lobbying their own gov-ernments to push Iraqi leaders and the United Nations to draf such a policy and widely disseminate it. Iraqs constitu-

tion stipulates that provinces which previously had been unairly deprived o resources could be compensated. Applied

judiciously, this provision could be used to placate both the southern provinces and the

Sunni provinces, which, since 2003, have been deprived.

In addition to a transparent policy on revenue distribution, the ederal government

should clearly outline an energy strategy or the country that includes the development

o the energy sector and the surrounding inrastructure. Tis would help stimulate

construction in the provinces where oil is being produced, which in turn could alleviate

some o the popular discontent.

Te oil companies have already done some things right in training Iraqi oil engineers

on new technology outside Iraq. Tis needs to turn into a comprehensive program

to develop a cadre o local technocrats who can be genuine partners or the IOCs in

the years to come. Such a program would involve identiying talented students, offering them scholarships to study

engineering and other fields needed or Iraqs upstream and downstream oil development, and enabling them to gain

hands-on experience with the IOCs themselves. Te IOCs must ensure that they do not become benevolent ounda-tions, which would only engender more problems. Tey should target projects and sectors that would aim both to quel

discontent and to serve their interests where they operate.

While the situation in Iraq is raught with many pitalls and dangers, there is a huge potential to create model policies

which, i developed and implemented effectively, could mitigate many o them. Te Iraqi government and the major oil

companies operating there would be well advised to look beyond the narrow view o oil development and think o this

as a broad step towards better institutions and a more stable state.

Abdul-Rama..

Te Iraqi govern-ment and the majoroil companies op-erating there wouldbe well advised tolook beyond thenarrow view o oildevelopment andthink o this as abroad step to betterinstitutions and amore stable state.


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Political and Legal Obstacles in Iraq

Nicholas Skibiak

Nicholas Skibiak is an

Associate at DuniaFrontier Consultants,specializing in upstream

petroleum productionand investment riskanalysis in the MiddleEast.

Since June 2009, the Government o Iraq (GoI) has secured nearly a dozen major oilfield technical service agreements with international oil companies (IOCs) afer two

highly publicized bidding rounds. Te deals are seen as the cornerstone o Iraqs eco-

nomic development in the coming years. While uture oil production has been rather

optimistically projected as high as 12 million barrels per day (bpd) by 2020, signifi-

cant obstacles to the development o the oil and gas industry remain. Te countrys

inrastructure and skilled labor supply are insufficient, the security situation remains

tenuous although much improved, and billions o dollars o investment are needed to

acilitate oil field development and exports.

In addition, legal challenges rom within Iraqs ractious political system also threaten

to derail development o the oil and gas industry. Central to this issue is the ambiguous

legal ramework that undergirds Iraqs oil industry. Te absence o any national hydro-

carbon law leaves lawmakers and regional governments at odds over procedural issues.

A draf law to govern investment and production has been in limbo since 2007 amid

disputes between Baghdad and the Kurdistan Regional Government (KRG) over the

proper mechanisms or revenue sharing.

Te Iraqi National Constitution as written (particularly Article 112(2) and Article 115)would seem to grant significant power to regional governments to manage hydrocar-

bon resources, as well as negotiate their extraction. However, the GoI has insisted on the

primacy o the central government in negotiating and signing any deals with IOCs. Fur-

thermore, the process by which the GoI negotiated contracts ollowing the two rounds

o oil auctions in 2009 was so centralized around the Ministry o Oil (MoO) that it has

drawn wide and vocal accusations o unconstitutionality.

One internal row that has drawn significant publicity, both within Iraq and abroad,

is the recent lawsuit filed by outgoing MP Shadha al-Musawi against the GoI, which

challenges the constitutionality o the November 2009 BP-CNPC Rumaila deal, and

aims to settle the question o whether Iraqs prime minister, parliament, or provincial

governments have the legal authority to finalize oil contracts with oreign firms. Mu-

sawi and her allies point to a pre-invasion law (Law 97 o 1967) that required ederal oil

contracts to be ratified by parliament, and argue that the same requirement should hold

or the Rumaila development. Te GoI, and the MoO in particular, have argued that the

Rumaila and other IOC deals are merely technical service agreements, and thus do not



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Skibiak...

warrant the same scrutiny as the production licenses envisioned by the 1967 law.

Even i Iraqi courts accept the governments deense, there are serious questions about how the MoO developed the

model contracts upon which the IOC deals were based. It is unclear whether government lawyers and ministers outside

the MoO were given the opportunity to scrutinize the contracts beore they were signed and declared legally binding.

Beyond these specific legal challenges there are quiet rumblings among Iraqs political actions about the possibility

o revisiting the oil contracts once a new government is ormed. Iyad Allawi, the leader o the Iraqiyyacoalition, has

promised a review o the IOC contracts i he becomes Iraqs next prime minister. Among the most vocal critics are

the ollowers o Shiite cleric Muqtada al-Sadr (the Sadrist rend), the Fadhila Party, and some other Iraqi nationalists,

who have accused the GoI o surrendering the nations oil wealth to oreigners, and insist that Iraq can develop its oil

resources relying solely on national efforts. Hazim al-Araji, a senior member o the Sadrist rend, said his party might

challenge the legality o the IOC contracts, claiming that there had been great mistakes in the negotiations.

It is unclear to what extent the promises to revisit IOC contracts are anything other than political rhetoric. Te GoI has

quietly assured IOCs that the legality o the existing contracts will not be challenged, but their confidence seems based

on the assumption that, given the importance o oil revenues to Iraqs economic u-

ture, no one would jeopardize the development o the oil industry by suspending field

operations or demanding lengthy renegotiations.

Another consequence o ailing to pass a national hydrocarbon law has been the lin-

gering dispute between Baghdad and the KRG over oil production and exports in

Iraqs northern provinces. Frustrated by stalled negotiations over a national oil law,

the KRG passed its own hydrocarbon investment law in 2007 based on a contentious

interpretation o the Iraqi constitution, and began independently issuing production

sharing agreements (PSAs) to several dozen smaller IOCs. Baghdad has condemned

these PSAs, which have drawn international scrutiny over allegations o impropriety (i not outright corruption). In

addition, the central government blacklisted any IOCs operating in partnership with the KRG, barring them rom its

2009 oil auctions.

Despite the strong stance taken by the MoO against the Kurdish PSAs, the promise o $2 billion in annual oil revenues

eventually compelled Baghdad in June 2009 to allow Kurdish oil exports, but only afer negotiating that all revenues

would be channeled into the ederally managed Development Fund or Iraq, rather than directly to Irbil. At the same

time, Baghdad reused to spend oil revenue on contracts it did not have a hand in negotiating, which lef the KRG un-

able to pay its IOCs. Afer months o squabbling between the governments, which saw Kurdish oil exports halted in

October 2009 and restarted in February 2010, the GoI reportedly agreed to cover the costs o oreign firms operating

in the Kurdish region, including paying exploration and extraction costs, but not their profits. On February 14, the

Te saga o theKurdish oil indus-try reinorces theimportance o a na-

tional hydrocarbonlaw in allowing orthe ull develop-ment o Iraqs oilindustry.


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F...

Iraqi Security Forces (ISF).

Te SOFAs greatest impact on companies conducting business in Iraq is that private US citizens, contractors, and their

employees no longer benefit rom the limited privileges and immunities offered under CPA Order No. 17. In other

words, contractors are now subject to the jurisdiction o the Iraqi civil and criminal

courts, and can be arrested or detained or violations o Iraqi law. In particular, Article

12 eliminates the contractor privileges and immunities offered under CPA Order No.

17. Additionally, the SOFA does not guarantee that any US citizen arrested or detained

is entitled to basic due process rights. Te US citizen is lef entirely in the hands and at

the mercy o the Iraqi judicial system. Tus, contractors conducting business in Iraq

must amiliarize themselves with the Iraqi judicial system, and its criminal and civil

laws. Tis provision, among others, creates a significant negative impact on oreign

companies conducting business in Iraq. For purposes o this essay, we will ocus mainly

on new changes in the SOFA that impact the civil side o conducting business in Iraq.

CoMPAnY REGISTRATIonS

Following the guidelines in the SOFA, all petroleum companies must register to do

business in Iraq in order to continue to perorm their existing contracts, or enter into

new contracts. Moreover, the echnical Service Contracts outlined by the Ministry o Oil (MoO) mandate that all

oreign companies maintain a domestic presence. While this may take the orm o a branch office or limited liability

company (LLC), it is a required element o the first and second petroleum bid rounds that companies have a domestic

license and comply with the yearly reporting requirements.

PoSTREGISTRATIon oBLIGATIonS

Once registered as a branch office or LLC, there are urther post-registration obligations. For example, branch offices

and LLCs involved in the petroleum industry must register or a corporate income tax file with the General Com-

mission or axes Corporate ax Department, and an employee must register or an income tax file with the General

Commission or axes Employee Wage Withholding Department. Tey must also register a social security file with the

Social Security Administration o the Ministry o Labor and Social Affairs.

VISA AnD RESIDEnCY ISSUES

Once registered to do business in Iraq, a company can sponsor non-Iraqi employees or visas and residency permits

Visas must be obtained prior to an employees arrival in Iraq (except or entry via the Kurdistan Region). Importantly

no visas may be obtained on arrival. All visas are approved by the Ministry o Interior (Residency Directorate) and then

[M]any challengeslay ahead, includingthe volatile securityenvironment, theabsence o a hydro-carbon law, and aninrastructure ...urgently in need o

rehabilitation aferyears o abuse andneglect under theSaddam regime,as well as urtherdeterioration since2003.


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orwarded to the Iraqi Embassy in the country o application or finalization. When entering Iraq, oreign employees

must report to the Residency Directorate within ten days o their arrival, and must present themselves to the Ministry

o Health or an HIV blood test within the same time period. However, stays o less than one week do not require such

reporting. Business visas are typically one month in duration. During this time, the employer must apply or a residency

permit or resident employees, and obtain all necessary visa extensions. When planning to depart, non-Iraqis in Iraq

must obtain an exit visa within six days o their desired departure date. For non-Iraqis who hold a residency permit, the

exit visa will include a reentry visa, valid or up to three months rom the date o de-

parture. Failure to return within the three months will void the residency. A non-Iraqi

will not be able to leave Iraq unless he or she is in possession o an exit visa. Finally, new

HIV blood tests are required or non-Iraqis afer extended absence rom Iraq.

PREPARInG FoR BUSInESS InVESTMEnTS In IRAq

When considering business investments in Iraq, you must be financially well prepared.

Under the new SOFA, US contractors and employees are no longer protected rom

Iraqi prosecution and enorcement o Iraqi laws. I your company is considering leaping into business in Iraq, it must

register quickly. Tis takes time, so do not wait or any grace period to expire. Also, be sure to educate and culturally

sensitize employees to the environment they are entering. When contracting, remember that the Riyadh Convention is

the preerred avenue or arbitration, and Jordan is a preerred jurisdiction. Obtain legal advice rom US and Iraqi coun

terparts to ensure your company is in compliance with registration, tax, employment, and visa/immigration laws. You

also will wish to establish procedures or your Iraq company and employees to ollow in case o arrest or detention so

that they know who to call, including their consulates (Iraq is a party to the Vienna Convention). Remember that Iraq is

in a transitional phase, and government capacity is low, which can sometimes lead to arbitrary and capricious treatment

by government officials. Nothing in Iraq happens quickly, and with an inrastructure that is in such poor shape, there are

many instances when phone systems, email, and other methods o communication just are not available. Finally, have

patience. Te ultimate payoff will be well worth the effort or both your company and or the ultimate success o Iraq as

a stable country in a volatile region.

F...

Under the newSOFA, US contrac-tors and employeesare no longer pro-tected rom Iraqiprosecution and en-

orcement o Iraqilaws.


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Charts & Maps


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US Energy Inormation Administration, January 1, 2010

PRoVEn PETRoLEUM RESERVES In IRAq

ToTAL oIL PRoDUCTIon In IRAq



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IRAqS oIL ExPoRTS To ThE US


nET PETRoLEUM ExPoRTS/IMPoRTS In IRAq



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REFInERY CAPACITY In IRAq



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Iraq's Petroleum Industry - Unsettled Issues

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