"The committee has finalised the draft of the law last night which has been approved unanimously by all the members of the committee and it will be before the cabinet early next week," Jihad said.




The US has pressured the national unity government to pass an oil law to help settle potentially explosive disputes among Iraq's ethnic and sectarian communities over the division of the world's third biggest known crude oil reserves.


"The law sets clear restrictions that all contracts will ensure the best benefit for Iraq"

Asim Jihad, Iraq oil ministry spokesman

"Everybody sees this law as a big achievement and as a national project. There are no differences on the law," Jihad said.


The oil committee, headed by Barham Salih, the deputy prime minister, will send the draft to cabinet next week for full approval. After that it will go to parliament.


Officials hope that the broad base of the negotiating team means it will pass easily.


A national oil company would be set up to develop production and exports and the law is intended to ensure balanced development of the oil industry across Iraq's regions, Jihad said.


It establishes a mechanism for centralising oil revenues and distributing them to the various regions.


"The law sets clear restrictions that all contracts will ensure the best benefit for Iraq," Jihad said.


Regional divisions


According to senior oil industry sources, regions of Iraq will negotiate with multinational oil companies on crude contracts and oilfield developments, but the central government must approve them.


Iraq desperately needs foreign investment to revive its shattered economy, which relies heavily on oil export revenues.


The division of oil is a key factor in communal tensions in Iraq. The southern oilfields around Basra lie in territory controlled by competing factions of the dominant Shia political forces, some of whom are close to Iran.


The division of oil is a key factor
in tensions in Iraq [EPA]
The northern fields lie on the edge of Iraqi Kurdistan around the city of Kirkuk. Many Kurds want to annexe the city as their regional capital. Ethnic Arabs and Turkmen accuse the Kurdish fighters of ethnic cleansing.


A referendum on the city's future is due this year.




The Sunni Arabs, dominant under former president Saddam Hussein, are concentrated in Baghdad and regions immediately to the north and west of the city, where there are few known hydrocarbon reserves.


Sunnis have been particularly insistent that the central government in Baghdad control the oil industry, despite a new, US-sponsored constitution, opposed by most Sunnis, which gives newly created federal regions some powers over oil and gas.


Washington and the government of Nuri al-Maliki, the Shia prime minister, are mounting a major security crackdown in Baghdad over the coming months to avert an all-out civil war between Sunni fighters and Shia militias.


Since the US-led invasion of Iraq in March 2003, Iraqi production has fallen from 3.5m barrels per day to about two million.