FALLUJA, Iraq (Reuters) - Authorities in a western Iraqi province rejected the results of this week’s government-organised gas auction, which allowed a pair of foreign companies to develop a big deposit on its territory.
The warning puts Anbar province on a collision course with the government in Baghdad, keen to allow foreign firms to tap its oil and gas reserves, and adds to a sense of uncertainty about doing business in Iraq.
In Iraq’s third energy auction since the 2003 U.S. invasion, South Korea’s Kogas and Kazakhstan’s KazMunaiGas Exploration & Production won a joint bid for Akkas, a field tucked away in the Sunni heartland of western Iraq.
Jassim Mohammed, head of the local provincial council, said Anbar wanted the Bagdad government to pay more attention to its needs when signing major contracts.
“We refuse and reject the foreign companies that won the contract to develop Akkas gas field,” Mohammed told Reuters. “We will not allow them to work and extract gas unless the opinion of the provincial council has been heard.”
He added Anbar wanted the Akkas contract to include a clause committing foreign companies to selling gas on the domestic market, as well as to processing it into value-added energy products that could be sold locally.
Baghdad had said the priority for the gas on offer was for domestic consumption but has held out the possibility of allowing some exports as well.
Oil ministry spokesman Asim Jihad shrugged off the remarks. “The oil ministry will reject (moves by other sides) to take advantage of this processes for political, electoral or any other reasons,” he said.
With major violence abating after years of sectarian bloodshed, Iraq is betting on oil and gas deals to help it shake off a legacy of war and rebuild the shattered economy.
But persistent opposition from some regions to the central government’s drive to open up the sector is a worry to investors who are keen to grab a share of the new emerging market.
On Wednesday, Oil Minister Hussain al-Shahristani assumed a defiant tone against provincial dissent. “Everybody who stands against these contracts will be held accountable,” he said.
Anbar, a former al Qaeda stronghold, had warned it would not provide security to foreign firms and threatened to use all means including “civil revolt” if Baghdad ignores its demands.
Hundreds of people protested across Anbar on Wednesday in a rally against the auction. Many held banners urging the state to preserve its resources.
Baghdad is embroiled in a dispute with the semi-autonomous Kurdish region over contracts the Kurds signed with companies to develop northern fields. Baghdad says the contracts are illegal.
Last month the oil ministry accused provincial officials and local police in Wasit of trying to raid the al-Ahdab oilfield being developed by Chinese oil company CNPC.
In Wednesday’s auction, Kuwait Energy and Turkey’s TPAO also won the bid for Siba gas field in Iraq’s relatively peaceful southern oil hub of Basra, while TPAO, Kuwait Energy and Kogas won the third gas field, Mansuriyah, near the Iranian border.
Ordinary Iraqis in the province, in stark contrast to their local government’s view, welcomed the arrival of foreign investors, saying the project would help create jobs and bring wealth to the sprawling desert region.
“We believe the contract will provide money for the country and it will provide jobs for the work force,” said Jassim Mohammed, 50, a retired employee.
Ahmed Mohammed, 50, who sells car parts in Falluja, agreed. “Not a single foreign company came to Anbar in the last 20 years,” he said. “We welcome them, we will support them and we will stand by them.”
Additional reporting by Aseel Kami in Baghdad, Editing by Maria Golovnina and Barbara Lewis