Late in October the local authorities of Iraq\'s northern Ninawa province began to invite local and international companies to develop an oil refinery in their region. They want a refinery that can produce more than 100,000 barrels of oil per day and they\'re offering a 20-year contract. In doing this, Ninawa authorities were taking an unprecedented step away from Baghdad, which is where decisions regarding these kinds of investments and projects are supposed by made – by Iraq\'s Ministry of Oil.
“An oil refinery here will put an end to the shortage of oil products in Ninawa, especially in parts of the province that are suffering from serious shortages in heating and vehicle fuels,” Atheel al-Nujaifi, the governor of the province, told NIQASH. “The shortage is caused by the fact that the province only gets a small share of oil from the central government and also because of problems transporting the oil from the Baiji refinery.” Baiji is on the main Baghdad-Mosul road and about 200 kilometres south of Mosul city.
Al-Nujaifi was enthusiastic about the idea. “A project like this will contribute to the employment of thousands of local people, it will provide the electrical energy we need and most importantly, it will act as gateway to other large investment projects in Ninawa,” he said.
The call for tenders came with a number of conditions. This included the prerequisite that companies applying be qualified or expert in the field, that they should have a history in this exact area, that they have the properly qualified staff for the job and that they should guarantee their company\'s long term commitment. Additionally the company should be fully capable of delivering the desired amount of barrels per day and that they should be willing to distribute the refined oil to Ninawa locals. In return potential investors will be free to specify where they want to locate their refinery.
The reason that the Ninawa provincial authority felt that it could take this step, of inviting the oil industry to set up a refinery, was due to a decision made by council members to allow the governor to contract oil companies to work in the province. This would done under strict conditions and in cooperation with the government of the neighbouring semi-autonomous region of Iraqi Kurdistan, they said, because some of the land that might come into question is in areas claimed by both Iraqi Kurdistan and federal Iraq. In other interviews al-Nujaifi has said that Ninawa would work together with Iraqi Kurdistan for mutual benefits and that his province could also learn a lot from the independent policy pursued by the Iraqi Kurds.
And as the Iraqi Oil Report wrote, “the [council\'s] vote is a victory for proponents of a decentralized Iraqi oil sector – especially the autonomous Kurdistan Regional Government, which has been locked in a nearly decade-long dispute with leaders in Baghdad over the shape of federalism in Iraq and the balance of oil powers”.
Additionally al-Nujaifi, a Sunni Muslim politician, who is allied with the Sunni Muslim opposition in Baghdad, says that the Shiite Muslim-led government in Baghdad, headed by Iraqi Prime Minister Nouri al-Maliki, is to blame for poverty and lack of economic development in Ninawa. As a result, he argues, the province is within its rights to try and search for other options to increase its own revenue. He believes that additional income and prosperity would help to stabilise the conflicted province.
So it seems the Sunni Muslim dominated province appears to be interested in cultivating an individual energy policy, that makes it independent from Baghdad.
The Ministry of Oil response to Ninawa\'s plan was swift. Oil ministry spokesman Assem Jihad said that any agreement with any oil company in any Iraqi province had to be finalised through the Ministry in Baghdad. No provincial governor has the right to contract the oil industry without Ministry consent, he said.
And the reason why the oil industry had not been being developed in Ninawa was due to the unstable security situation in the province, Jihad explained. Ninawa contains some of Iraq\'s most troubled and dangerous cities, places like Mosul and Kirkuk, as well as areas that are part of Iraq\'s so-called disputed territories – that is, areas that Iraq says belongs to them, while the Kurdish say they belong to Iraqi Kurdistan.
“If there was a suitable environment for investment in Ninawa, then the Ministry would cooperate to allow the development of refineries in the province,” Jihad added.
But the head of Ninawa\'s provincial legal committee, Nofal Hammadi al-Akoub, said that Baghdad was relying on out dated oil and gas laws – federal Iraq still doesn\'t have a national oil and gas law, even though Iraqi Kurdistan has passed it\'s own.
Those older laws relate to the preservation of oil wealth by preventing illegal extraction of oil. However, as Hammadi al-Akoub points out, “the provincial council didn\'t authorise the extraction of oil. Rather they authorised investment in oil. In taking this decision they were relating back to a 2008 law that gives provincial councils this authority – so the Ministry can\'t actually object.”
If there is any contesting of the council\'s decision to be done, “parliament is the only entity that has the right to do this and the Supreme Federal Court will make the final decision,” al-Akoub told NIQASH.
But it is not only the Iraqi government that is upset by the invitation for tenders. Some of the critics of the local government move come from within the council itself. Different factions within the council are concerned that the move will open the door for more Iraqi Kurdish companies to enter the disputed territory, and put the Iraqi Kurds ahead in the battle over disputed territories within Ninawa. For example, one Kurdish firm already made several offers to start a refinery in Ninawa, in 2012, but each offer was rejected, for exactly that reason. The claim is that the Iraqi Kurdish are illegally taking up the province\'s territory in projects that bypass Baghdad\'s authority.
Governor al-Nujaifi is critical of those rejections, saying the council made the decision for political reasons, rather than for the good of Ninawa. He says the province really needs the economic boost provided by this kind of project.
Anyway, as it stands now, the invitation has only just been extended by Ninawa\'s authorities. And apart from the politics around the issue there is another major problem that might not make the idea all that appealing to the international oil industry. There\'s been a rash of serious security problems in the province, and this has included not only Sunni extremist groups affiliated with Al Qaeda making the troubled city of Mosul a base, but also several attacks on oil fields and oil pipelines.