Op-Ed
Commentary
Global
Insight:
Middle East energy analysis
Iraq: Oil Refineries Law Passed Amid Violence Targeting Top
Oil Ministry Officials
(Wed 25 Jul 2007) - Iraq's parliament yesterday approved a draft
refinery law that allows for international companies to invest
in and construct Iraqi refineries. The law allows provincial
authorities and regional governments to individually enter into
agreements with international companies and award building and
operating licences to investors. The law stipulates that the
Iraqi Oil Ministry is bound to supply private refineries with
crude at the export price, minus transportation costs and with
a 1% discount. Private refineries are also guaranteed the right
to market their products within or outside Iraq, at their own
choice. The law also requires at least 75% of refinery workers
to be Iraqi and allows refiners access to Iraqi storage, port
and crude/products transport facilities. Meanwhile, three senior
Oil Ministry officials, including the head of the fuel distribution
company, were killed in an ambush in the capital, Baghdad, yesterday.
The heads of the State Company for Oil Projects and the North
Oil Company were among several kidnapped in the same incident.
Significance: The refinery law was never as contested and controversial
as the proposed oil law, which regulates who will have the power
over the country's oil and how the oil industry is to be organised,
as well as the connected revenue-sharing law, which specifies
how much Iraq's different factions stand to receive. The law
is—because of its uncontroversial topic—quite liberal,
allowing for private investment with very reasonable restrictions,
compared to many of Iraq's neighbours. It will not make any immediate
difference, however, since such large infrastructural investments
are all-too-easy targets in the continued violence, and because
the investment time-frame is too long for such massive insecurities
like the ones Iraq suffers to be tolerated.
Iran:
Parliament Moves to Challenge Iranian Government over Gasoline
Rationing Quotas (Wed 25 Jul 2007) - Iran's parliament has
agreed to give a bill
enabling Iranians to buy gasoline (petrol) at market prices outside
the monthly quota first priority, in defiance of President Mahmoud
Ahmedinejad's policy. Attaching first priority to a bill means
that it will move automatically to the top of the parliamentary
agenda and will be debated in the chamber in the coming days.
There has been reoccurring pressure on the Iranian parliament
to allow consumers the option of unlimited gasoline purchases
at market prices, in order to stem potential widespread discontent
when people start to run out of their allotted quotas. President
Ahmedinejad has, however, opposed the measure out of concern
that it might stoke already-high inflation.
Significance: Although higher gasoline prices will strengthen
inflationary tendencies in the economy, the inevitable black
market— which according to some reports is already forming—has
the potential to do more harm to the people's confidence in the
Iranian currency's value. Underlying the president's choice—against
the advice of a very unified front of experts and legislators,
many from his own party—was probably the fear of the symbolism
in letting people see things becoming so expensive following
his election-winning promises to deliver the oil revenues to "every
Iranian's table". This measure, however, needs to be taken
as consumers' ability to plan their use of four (to be extended
to six) months' quotas in one go will lead to many running out
totally of gasoline a long time before they get access to new
quotas, creating the potential for violent protests. Allowing
extra-quota gasoline purchases—albeit at many times higher
prices—will provide the system with a safety vault, letting
off some steam.
By Samuel
Ciszuk
Samuel
Ciszuk is an
energy analyst (Middle East) for Global Insight International.
(samuel.ciszuk@globalinsight.com). Petroleumworld not
necessarily share these views.
Editor's
note:
For more analysis from Global Insight, contact Catarina
Walsh, Media Relations, Global Insight [International] + 44
(0) 20-7452-5183 (catarina.walsh@globalinsight.com)
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News 07/27/07
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