Sustainable Development For Iraqi Oil And Gas Resources In the Light of International Law - Dissertation Example

Page Content Chapter Introduction 3 1 Thesis ment 3 2. Background of the study 4 3 Objectives and the scope of the study 7 4 Importance and justification of the study 7 1.5 Research questions 8 1.6 Research methodology 8 1.7 Structure of the study 10 1.8 Contribution to the filed of knowledge 10 Chapter 2. Literature Review 11 2.1 Sustainable Development in International Law 11 Chapter 1. Introduction 1.1 Thesis statement According to World Bank (2010), “the Iraq’s oil and gas sector contributes to about 65% of its GDP, over 90% of public revenues, and most of its foreign exchange earnings” (A critical sector, Para.1). This sector is considered to be central to Iraq’s fiscal position and critical to the Iraqi economy. At that, Iraq has 115 billion barrels of proven oil reserves and plans to expand oil production at the rate of about four million barrels per day (mbd) by 2013 and to six mbd by 2017 (Blanchard 2009: p.1). Although the need of new legal and policy guidelines for the sustainable development of the country’s petroleum resources is widely recognised among Iraqis, due to ongoing political debates the effective solution has not been found so far. The main reason is significant differences in the understanding of “the proper role and powers of federal and regional authorities in regulating oil and gas development; the terms and extent of potential foreign participation in the oil and gas sectors; and proposed formulas and mechanisms for equitably sharing oil and gas revenue” (Blanchard 2009: Summary, Para.2). Such differences are especially apparent in disagreements between the Iraq’s national government and the Kurdistan Regional Government (KRG). This study is based on the main proposition that in order to meet the increased world demand of fossil fuels, as well as national need in accelerating of national economy’s growth rate, Iraq should develop an official law and policy in regard to development and use of oil and gas resources, which should be supported by adequate enforcement mechanisms. Such law and policy should be agreed, recognised and accepted throughout the country, and what is also important, law and policy should be in entire conformity with international environmental laws and major international regulations in the area of sustainable development of oil and gas resources. 1.2. Background of the study Overview of the current situation in the Iraqi oil and gas industry From 1975 to 2003 the Iraq’s oil and gas industry has been entirely state-operated. Blanchard (2009) points out that during this time the infrastructure “suffered from the negative effects of war, international sanctions, a lack of investment and technology, and, in some cases, mismanagement” (p.1). After the collapse of Saddam’s Regime in 2003, new Iraqi government started to put plans to develop oil and gas industry as the sector critical for the national economy. The Iraqi Constitution states that oil and gas are exclusively owned by the Iraqi people in all regions, implying that the management of these resources is a federal responsibility. Nevertheless, the Kurdistan Regional Government (KRG) has opposed these and other related statements, interpreting the Federal Oil and Gas Law so that to pursue its own Regional Oil and Gas Law and policies (Al-adhadh 2008: p.7). KRG claims: “Under the country’s constitution, oil and gas management is primarily a Regional right, and the main features of this Law are in line with Iraq’s draft oil law. …The Law not only affords the Kurdistan Region a clear and transparent legal structure for negotiations with investors; but it also benefits the rest of Iraq as, consistent with the constitution, the law requires the Kurdistan Region to share revenues from oil and gas development with the Federal Government in Baghdad” (Strategic Media n.d.: p.8). Such disagreement between national and regional interpretations of the Iraqi Oil and Gas Law entailed the current situation when, in spite of lengthy debates of economists and politicians, the common integrated and harmonised solutions in development and use of national oil and gas resources are not still found. At the same time Al-adhadh (2008: p.7) emphasises that the model of regulations of hydrocarbon resources at a regional level is extremely dangerous for the future of the Iraqi petroleum industry and for the national economy as a whole. Al-adhadh (2008: p.7) alarms: “If [such regional law] is adopted as a model for other Governorates …then, evidently, no national strategy for the optimum development of Oil Extraction Industry would be possible in Iraq. The obvious consequence here is that a major dimension of rationality to use depletable natural resource, (oil and gas), for sustainable development is knocked down; dimming the economic future of all Iraqi people, including the Kurds themselves, even if they were to split in a separate state.” Meanwhile, Richardson & Wood (2006) point out that any today’s environmental law should have an impact on sustainability, helping to move countries, regions and societies toward “ecologically sustainable patterns of production and consumption” (p.13). Sustainability as a set of established practices, in its turn has an impact on environmental law, causing alterations and development of new doctrines and legal mechanisms. Understanding the Concept of Sustainable Development Sustainable development can be defined as “development that meets the needs of the present without compromising the ability of future generations to meet their own needs” (WCED 1987: Para.1). This means that all different parts of a process of exploitation of natural resources, including investments, technological innovations and institutional changes should be in harmony, ensuring current and future potential to meet human needs and requirements. The concept of sustainable development with regard to the oil and gas industry is of particular importance because these natural resources are non-renewable resources. Arscott (2004) suggest to view sustainable development in the oil and gas industry as “... Carefully balancing social, economic and environmental capital in a continuously changing world. The oil and gas industry’s role in sustainable development should be to meet the needs of the global society for oil and gas at a reasonable cost, safely and with minimal impact on the environment until suitable alternative energy sources are available” (p.1) Thus, from this definition one can draw the conclusion that in order to ensure sustainable development of petroleum resources it is necessary to provide integration of economic activity, environmental protection and social development in areas of exploration and production of oil and gas resources. It is necessary to keep in mind that, in spite of economic growth is considered to be a powerful means of improvement of human well-being, economic development must be within the limits of what is ecologically sustainable. This is important because environment not only provides the resources for economic activity, but also ensures ecological conditions for life of humans. So, ecology is of the same great importance as economy. Several Important Sources of Sustainable Development International Law Langenkamp (2003) asserts that if a country wants to be recognised and to receive world-wide support, it should undertake serious efforts “to comply with the general prescriptions of international law, both written and customary” (p.6). The major principles of international sustainable development law were stated in the Rio Declaration on Environment and Development 1992 (known as Agenda 21) and the following Johannesburg Declaration on Sustainable Development adopted at the World Summit on Sustainable Development (known as Earth Summit) in 2002. According to many opinions, these documents contain a comprehensive description of norms and actions that should be taken by organisations of United Nations globally, nationally and locally in order to ensure sustainable development. Among other sources “the United Nations Environmental Program (UNEP) Guidelines on environmental assessment, the International Maritime Organization Guidelines on removal of offshore structures, and directives issued by the World Bank requiring EIAs for offshore oil and gas projects and measures to reduce environmental harm” (Weaver 2003: p.62), as well as the International Chamber of Commerce’s Business Charter for Sustainable Development could be mentioned with respect to sustainable development of oil and gas industry. 1.3 Objectives and the scope of the study This study is focused on the unique current conditions in the Iraqi oil and gas industry and on the prospects for sustainable development in the production and end use of oil and gas in Iraq, with particular reference to Kurdistan region. The primary aim of the study is to explore the possibilities and obstacles to sustainable development of Iraq’s Oil and Gas and to propose an effective national framework in accordance with international legislative regulations in the area of environmental sustainable development. Main objectives of the study are: 1. To clarify the concept of sustainable development in the use of petroleum resources.  2. To explain the rights of Iraq, in the use of petroleum resources under international law and the impact of its international obligations on the use of this rights and it’s sustainable development.  3. To identify and assess the Iraqi constitutional provisions governing Oil and Gas, and the differences it raises with the Kurdistan Regional Government.  4. To assess the legal and institutional organizations for the sustainable development of Oil and Gas in Iraq and Kurdistan Region.  5. Analyse and evaluate the obstacles to sustainable development of Iraq’s Oil and Gas, and propose the appropriate legal framework and policy to achieve this end. 1.4 Importance and justification of the study This study intends to answer a number of important questions, critical for the national economics of Iraq in terms of creating conditions for the effective management of Iraqi oil and gas industry in accordance to modern international policies of sustainable development. Taking into consideration the current context of the Iraqi economy and society, it is possible to presume that such management should involve all interested parties, including the entire Iraqi people (who should be considered the true owners of natural resources of the country) and national and international investors (who should gain considerable benefits, not only in terms of revenues, but also in regard to sustainability of sources of income). The findings of the study show that there is a clear need for a national strategy of sustainable development in the use of petroleum resources in Iraq, as well as a need for legal and institutional mechanisms for international partnerships and investment capital attraction. 1.5 Research questions The study intends to answer the following research questions: 1. How to achieve sustainable development for Iraqi oil and gas resources? 2. Whether new Iraq’s laws and regulations concerning oil and gas (after 2003) take into account principles of sustainable development? 3. How to resolve the disagreement between federal and regional government over development of oil and gas resources? 4. What are the obstacles of sustainable development for Iraqi oil and gas in international level and local level?  1.6 Research methodology In this study a descriptive form of research has been chosen as a main methodology. The objective of a descriptive research is “to portray an accurate profile of persons, events or situations” (Saunders et al. 2009: p.134); it helps to explore and reveal the true nature and status of relationships and existing practices, beliefs and processes, taking into account environmental conditions, which are at the moment of the study (Creswell, 2003: p.116). The descriptive approach also helps to gather first hand data from the respondents, their current feelings and impressions, on the basis of which it is possible to formulate rational conclusions and fruitful recommendations for the study. Descriptive research gives a picture of specific features of a concept, answering the questions “how?” and “who?” (Neuman 2007: p.16). According to Teagarden et al. (1995: p.1280), the desired outcomes of a study are the generation of reliable and valid data and accurate interpretation of the data. So, a right choice of research methods is of a great importance. In order to meet the research objectives of this research, a qualitative research is used as the main strategy of this study. In such type of research the emphasis in collection and interpretation data is more on words rather than quantification. It allows orientating research to generating of theory rather than theory’s testing, presuming that a social reality is a “constantly shifting emergent property of individuals’ creation” (Bryman & Bell 2007: p.28). Literature review and semi-structured in-depth interview are applied as the main research methods in this study. Literature review can be defined as “a carefully crafted summary of the recent studies conducted on a topic that includes key findings and methods researchers used while making sure to document the sources” (Newman 2007: p.70). This method is used for re-analysis of secondary data, or data, “that have already been collected for some other purpose” (Saunders et al. 2009: p. 256). In this research generally accessible data sources are used for the literature review – research reports and papers, articles in professional and economic magazines, books, governmental documents, and trusted internet resources. As the main technique for gathering primary data a semi-structured in-depth interview is used in order to gain in-depth information (explanations, interpretations, opinions) on the area of the study from managers and executives of different organisations related to the Iraqi oil and gas industry. In such type of interview “the researcher wants to know specific information which can be compared and contrasted with information gained in other interviews” (Dawson, 2002, p.28). The primary advantage of in-depth interviews is that “they provide much more detailed information than what is available through other data collection methods, such as surveys. They also may provide a more relaxed atmosphere in which to collect information - people may feel more comfortable having a conversation with you about their program as opposed to filling out a survey.” (Boyce & Neale 2006: p.3) 1.7 Structure of the study The remaining content of the study is organised as follows. Chapter 2 offers a review of the state-of-the-art related researches and non-research literature on sustainable development issues and international, national and regional legislative provisions governing the use of petroleum resources. An overview of the current problems in the Iraqi oil and gas industry is also presented in Chapter 2. The process and results of semi-structured in-depth interviews are given in Chapter 3. Findings of the study are discussed in Chapter 4. The final Chapter 5 provides conclusions drawn from the study and recommendations for future research in the area of sustainable development for oil and gas resources. 1.8 Contribution to the filed of knowledge The study explored the concept of sustainable development for petroleum resources in Iraq, taking into consideration specific conditions related to Kurdistan regional policy, as well as to current disagreements in federal and regional legislation in this area. Author strongly hopes that the study will make a significant contribution to the field of knowledge related to sustainable development on the whole, and the development of regional gas and oil resources, in particular. The study will contribute to and support positive changes in the national Iraqi economy and economies of other countries, helping to understand better ways and methods of resolving current problems. In addition, the study is also helpful for researchers who are going to conduct further research in the area of sustainable development in the use of petroleum resources. Chapter 2. Literature Review 2.1 Sustainable Development in International Law Sustainable development is widely recognised as “the golden rule of our civilisation in the 21st century” (Voigt 2009: p.4). The concept (defined above in the sect. 1.2) is primarily based upon the values and ethics shared within today’s interdependent world, aiming to provide an integration of environmental protection, economic development and social justice (including human rights) at international, national and regional levels. At the international level the concept of sustainable development is applied as global policy and as an essential part of the international environmental law (Bosselmann 2008: p.24). While at the national level, governments of many countries address the concept, introducing specific national strategies for sustainable development, organising various intergovernmental offices and independent advisory boards, as well as issuing national environmental legislations that contain the sustainability principle. At the same time, Boer et al. (1998: p.19) emphasise that principles and norms, which are intended for the whole nation, are often more effective when they are used at regional levels. Boer et al. (1998: p.19) distinguish two particular strategies to deal with regional issues related to sustainable development. The first one is “to deal comprehensively with environmental problems within a specific region” (Boer et al. 1998: p.19), while the second one is to develop “specific regional conventions which address a certain sectoral issue” (Ibid.), for example, marine pollution or hazardous wastes. Undoubtedly, a regional regime dealing with oil and gas resources refers to this second type environmental law regimes. Boer et al. (1998: p.20) believe that such regional initiatives are extremely helpful for reinforcing the global environmental law, yet allowing protecting and preserving regional environments for states’ interests. It is also important to note that regional and national policies and legislations related to sustainable development should be consistent with the principle of equitable use, taking into account the needs of other states, especially those that may be affected as a result of a development activity. The World Commission on Environment and Development explain the concept of sustainable development as “a process of change in which the exploitation of resources, the direction of investments, the orientation of technological development and institutional change are all in harmony and enhance both current and future potential to meet human needs and aspirations” (WCED 1987: p.46). Today the concept of sustainable development is widely adopted by major international organisations, such as the United Nations, the World Bank, the World Trade Organisation, the Organisation of Economic Cooperation and Development (OECD). In parallel to an increasing number of international legal documents related to sustainable development, a number of national and regional laws and conventions also adapt the concept and use specific indicators to measure their progress towards sustainable development. So, for example, Germany, Norway, Australia, Argentina, and New Zealand declare sustainable development as a key objective of the states and incorporate principles of sustainable development into their national laws (Voigt 2009: pp.23-24). However, the reaction of some other countries, in particular, developing countries, to the concept is not so positive. Voigt (2009: p.23) believes that the reason is in that these countries, having plentiful stocks of natural resources, want to remain free to choose their own development strategy and direction, while sustainable development regulations imply certain limitations for that. Nevertheless, in spite of the concept of sustainable development still remains controversial and is considered by some experts as ill-defined, it is being more and more recognised and accepted by the world community. This fact is confirmed by the appearance of numerous standards, legal mechanisms and enforcement techniques, developed by international institutions and national governments, which give convincing proofs of consolidation and proper implementation of the concept. Generally speaking, nowadays sustainable development is associated with the “policies of economic liberalisation which have proven their success in both generating the necessary incentives for prosperity by investment and trade and their ability in generating both resources and expectations for enhanced environmental quality” (Walde 2004: p.138). At that, some principles guiding to sustainable development can be identified: corporate profitability, resource depletion, competitive and properly regulated and taxed markets, and reasonable and differentiated regulation (Ibid.). 2.2 Core Issues in the Iraqi Oil and Gas Law Regulation Harris et al. (2007) consider that three domains of sustainable development (environmental, industrial and societal) are “inter-related parts of the modern Iraqi nation” (p.6). The environmental domain relates to the Iraq’s water resources; the industrial domain – to the Iraq’s oil and gas resources; and the societal domain - to the Iraq’s demographic resources. Current Iraqi resources, both water and petroleum, are sufficient to sustain the country into the near future. However, the today’s Iraqi government strives to strengthen the concept of sustainable development at the national level, consolidating hydrocarbon resources through the central headquarters in Baghdad. Such policy is controverted and opposed by the Kurdistan Regional Government (KRG), which wants to see the region free, rich and independent. Al-adhadh (2008) explains the current situation in the Iraqi oil and gas industry (see also Sect. 1.2) by imperfection of the current Iraqi Constitution, which has two inconclusive Articles, namely the Article No.110, which “specifies the exclusive duties or powers of the Federal Government” (p.7) and the Article No.121, which “bestows legal, executive and judicial powers upon regions, …and grant them the right to amend or override any Federal Law” (Ibid.) That’s why the Kurdistan has the own Regional Oil and Gas Law, according to which investment and production sharing agreements are being signed at present time. USAID (2003) emphasises that a strong legal basis is necessary for the Iraqi Government in order to “provide a strong framework of guiding principles” (p.35). However, the Federal Oil and Gas Law (FOGL) is still on hold. Jiyad (2011: p.6) considers that such a state of affairs is profitable for both the federal Ministry of Oil (MoO) and KRG – in the absence of the federal hydrocarbon law each of them can sign a number of contracts by its own way. Many experts are uneasy about the situation and suggest different ways of its resolving. In this regard Al-adhadh (2008: p.10-11) considers that: 1. The fundamental Constitution must be amended to incorporate a clear-cut provision, stating that the operation and management of the oil and gas resources are a federal responsibility. 2. Provision for relevant mechanisms of regional coordination and transparent consultation, between the Federal Government and the KRG and all other Governorates, especially the oil producing ones, must be included. 3. Revision of the KRG Oil and Gas Law must be carried out to incorporate a mechanism for coordination and consultation with the Federal Government, and to eliminate all provisions that militate against the principles of achieving “Optimum” regional and national development of a unified and democratic country. 4. Set-up all the necessary institutions, required to carry out, efficiently, oil and gas operations and policies. Jiyad (2011: p.14) adds that the new FOGL should be “clear, well phrased, coherent and consistent to the extent that it put an end to the different interpretation of the related clauses and provisions of the constitution. It is vital that the new FOGL upholds the two core principles of collective ownership and best interests of the Iraqi people enshrined in the constitution.” References Al-adhadh, K.K. (2008) Optimization Policies for the Management of the Iraqi Oil Extraction Industry. 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