Tuesday, December 28, 2010

Iraq’s New Oil Minister Getting Ahead Of Himself In Announcements

Oil Minister Luaibi
Since Iraq’s New Oil Minister Abdul Karim Luaibi took office on December 21, 2010, he has made a number of bold statements. He’s claimed that Iraq has hit the highest production levels since the 2003 invasion, and that Baghdad and Kurdistan have reconciled their differences over natural resources, and are ready to work together. Unfortunately, many of these statements appear aimed at announcing himself as one of Iraq’s newest and most important ministers, rather than being based upon actual achievements.

Minister Abdul Karim Luaibi was the deputy to the former Oil Minister Hussein Shahristani. According to press reports, he was part of the team that negotiated contracts and terms with the foreign oil companies before and after the two bidding rounds in 2009 for Iraqi fields. He has a Bachelor’s Degree in oil engineering from the University of Baghdad, and began working at the South Oil Company in 1983. Most believe that he will continue on with Shahristani’s plans to dramatically expand Iraq’s oil industry with the help of the international energy businesses.

Perhaps not wanting to live in the shadow of his predecessor, Luaibi has tried to make a splash since his first day in office by claiming that Iraq has achieved several important breakthroughs. On December 22, the Oil Ministry announced that oil production had increased 10% to reach an average of 2.5 million barrels a day. The ministry said this was the highest amount since 2003. Luaibi then outdid himself by saying that Iraq had reached 2.6 million barrels on December 26. He went on to say that was the most produced in twenty years. In between, on December 23, the Minister claimed that a deal had been signed between Baghdad and the Kurdistan Regional Government (KRG) to allow the Kurds to export oil once again in just a matter of days. He stated that the central government will recognize the Kurdish oil deals, and pay the companies for their costs of operation, while Kurdish petroleum will go through the northern pipeline to Turkey and the revenues will be deposited in the capital.

The problem is that few of these statements were actually true. First, Iraq has reached or surpassed 2.5 million barrels a day seven times since 2003, and even produced 2.6 million barrels once before. In September 2004 Iraq produced 2.51 million barrels a day. In May 2008 they reached 2.6 million barrels, followed by 2.52 million barrels in June 2008, 2.54 million barrels in July 2008, and 2.5 million in August 2008, September 2009, and October of that year. Immediately before the U.S. invasion the Oil Ministry was pumping an average of 2.58 million barrels a day, but there are reports that production reached as high as 3 million barrels pre-2003. That means it’s unclear whether Luaibi’s claim of a twenty year high is true or not. As for a breakthrough between Baghdad and the KRG, a spokesman said on December 26 that there had been no discussion within the Oil Ministry about recognizing Kurdish oil contracts or allowing the Kurds to export again. 

Abdul Karim Luaibi was the deputy to one of the most powerful Oil Minister’s in recent history, Hussein Shahristani, and now wants to make his own mark. Shahristani tried to block the Kurds’ independent resources policy, develop the rest of the industry through deals with foreign companies, and wanted Iraq to be a leader in OPEC once again. That gave Luaibi some large shoes to fill, and was probably a factor in him claiming that Iraq had reached new highs in production immediately after he took office, and that a major step towards reconciliation had been achieved with the Kurds. The facts don’t support him, but the Iraqi and international media are not known for doing checks on pronouncements by politicians. Getting that attention however, was probably his intended goal to show that he was his own man, and capable of making an immediate impact upon one of Iraq’s most influential ministries. Actually reaching a new post-war high in oil output and cutting a deal with the Kurds are things he should be focusing upon, but he should be doing instead of talking if he wants to make himself different from the rest of Iraq’s political class.


Ali, Yaser, “KBC: Maliki signs agreement to Kurdish conditions,” AK News, 12/21/10

Aswat al-Iraq, “Oil ministry achieves highest production since 2003,” 12/22/10

Carlisle, Tamsin and al Sayegh, Hadeel, “Iraq gives go-ahead to Kurdish oil contracts,” The National, 12/26/10

Dow Jones, “Iraq Oil Minister: Kurdish Agreement ‘Activated’ In Days,” 12/24/10

Dunlop, W.G., “Iraq oil production tops 2.6m barrels a day,” Agence France Presse, 12/27/10

Said, Summer, “2nd UPDATE: Iraq Oil Min: Ctrl Govt To Recognize Oil Deals Inked By Kurdistan,” Dow Jones, 12/25/10

Salaheddin, Sinan, “Iraq’s new oil minister close ally to predecessor,” Associated Press, 12/21/10

Sandalow, Marc, “Analysis: Deceptively low-key handover is critical to Bush,” San Francisco Chronicle, 6/29/04

Special Inspector General for Iraq Reconstruction, “Hard Lessons,” 1/22/09


Joel Wing said...

AK News reported today that the 2.6 mil/bar/day production mark Minister Luaibi talked about was only for one day in Dec.!


Anonymous said...

It's quite clear that he meant one thing: that the KRG contracts will be recognised...I don't know how you've come to the conclusion that he meant the 19 demands Maliki has promised to accept...that's one thing and as a minister coming out saying "yes they will be recognised" is also another and it would be difficult to get it wrong.

Also, where's your souce for that 26 december spokesman comment that no discussions have taken place? Do they need to take place, given that they've been doing that for the past nine months and the end-result (ie recognising the contracts) was at the behest of those negotiations?

Joel Wing said...


Luaibi said that there was a "signed deal" between Baghdad and the KRG over oil exports, and implied that this included recognizing the Kurdish oil contracts.

A few days later however a spokesman for the Oil Ministry said that Kurdish exports will go ahead as part of the 2011 budget but the Ministry had not discussed the contracts. That was included in the following article:

Dunlop, W.G., “Iraq oil production tops 2.6m barrels a day,” Agence France Presse, 12/27/10


And if there is a signed deal to recognize the contracts, the Kurds don't know about it because the story today was that they are pushing Baghdad for just that type of recognition.

Associated Press, "Iraqi Kurds push for recognition of oil deals," 12/28/10


So who are you to believe, Luaibi who said there's a signed deal already about the Kurdish contracts, or the Oil Ministry spokesman and the Kurds who say there hasn't been?

Joel Wing said...

I stand corrected. Reading back through the original articles he said that there had been a signed deal between Baghdad and the Kurds from the beginning of 2010 so he wasn't thinking about Maliki signing onto the Kurds 19 demands. I'll change the article to reflect that.

Anonymous said...

Thanks for your response Joel. Here's the link for that article where he explicitly says "yes we will recognise them": http://www.nasdaq.com/aspx/stock-market-news-story.aspx?storyid=201012250836dowjonesdjonline000275&title=2nd-update-iraq-oil-mincentral-government-to-recognize-oil-deals-inked-by-kurdistan

Anonymous said...

And I'd be careful about placing too much importance on that quote from the spokesman - "we haven't had any discussions" is different to a Minister saying the WILL be recognised. In other words, the contracts will be recognised once we get down to work and sort out the technicalities.

Joel Wing said...


I'm not disputed Luaibi saying that the Kurdish contracts will be recognized. It's just that he seemed to be saying that it's a done deal, and the spokesman and Kurds are saying it's not.

It's important when and if the deals are finally approved by Baghdad because the Kurds have said they're not going to export until they are and have threatened to hold up the budget as well over the matter.

Anonymous said...

Dont pay too much attention to what the new Minister of Oil or the MoO Spokesman said! Joel is aware that sice 2006 the GoI, especially the PM, made piles of statements none of which materialised. Keep in ind also that the leaving minister of oil Hussaien Al Shahristani, who still holds a trong grip on the MoO through his new position as Deputy PM for Energy, said on 22 December that KRG oil contracts will never be recognised!