The oil licensing rounds initiated by Iraq post-2003 have represented a significant step in attracting global oil companies to operate in producing, discovered, and undeveloped fields. The terminology of oil contracts has varied to include concession contracts, oil licensing contracts, or simply oil contracts.

Definition of Oil Licensing Contracts

An oil concession contract is defined as a legally binding investment agreement, with oil concession contracts being the oldest contracts globally. Licensing round contracts, on the other hand, are service contracts where the foreign company acts as a contractor serving the national company in the producing country and receives a fee from the latter, which commits to selling it a quantity of oil at a preferential price.

Accordingly, there is no direct legal relationship between the foreign company and the subsurface; the national company is the sole owner of the oil wealth. Service contracts are the modern form of foreign investments in the oil industry, which require massive capital, in addition to technical knowledge and modern technology.

Legal Basis of Licensing Round Contracts

The legal basis for licensing round contracts is derived from Article 112/Second of the current Iraqi Constitution and Article 5 of the Ministry of Oil Regulation Law No. 101 of 1979, which stipulates that the Ministry of Oil shall manage the oil sector.

Importance of Licensing Round Contracts

Licensing round contracts hold significant importance for Iraq as they:

• Benefit from the expertise of international companies: These contracts contribute to transferring advanced technology to Iraq and developing the skills of the national workforce.
• Increase oil production: These contracts help increase oil production rates, thereby boosting the Iraqi economy.
• Provide job opportunities: These contracts help create job opportunities for Iraqis, thereby reducing unemployment.
• Build infrastructure: These contracts contribute to building infrastructure in Iraq, thereby improving the citizens' living standards.

Methods and Techniques of Concluding Oil Licensing Contracts

Iraq follows three main methods for concluding oil licensing contracts:

• Public Tender: This is the most common method, where the tender is announced in local and international newspapers, and all interested companies are given the opportunity to submit their bids.
• Limited Tender: A limited number of companies are invited to submit their bids based on specific criteria.
• Single Tender: A direct invitation is extended to a single company to implement the project in certain cases, such as strategic projects or those requiring quick execution.

Supervision of Oil Licensing Contracts by the Iraqi Ministry of Oil

The Iraqi Ministry of Oil plays a crucial role in supervising oil licensing contracts to ensure that the contracting companies comply with all contract terms and protect the interests of the Iraqi state. The ministry derives its supervisory powers from the Iraqi Constitution, laws, and prevailing regulations.

The Iraqi Ministry of Oil is the entity responsible for managing the oil sector in the country, according to the Ministry of Oil Regulation Law No. 101 of 1979, which states that "the Ministry of Oil shall manage the oil sector in Iraq, including:

• The exploration and extraction of oil and gas.
• The transportation, refining, and export of oil and gas.
• The management of oil and gas contracts." (Article 5) Based on these legal provisions, the Iraqi Ministry of Oil issues instructions and directives to regulate the supervision of oil licensing contracts.

Mechanisms of Supervision by the Iraqi Ministry of Oil on Oil Licensing Contracts

The Iraqi Ministry of Oil exercises strict supervision over the implementation of oil licensing contracts through multiple mechanisms, including:

• Periodic review of contracts: The ministry periodically reviews contracts to ensure companies' compliance with their terms.
• On-site inspections: The ministry inspects work sites to ensure companies' adherence to safety and quality standards.
• Monitoring oil production: The ministry monitors oil production to ensure companies meet the agreed quantities.
• Imposing penalties: The ministry imposes penalties on companies that violate contract terms.
• International arbitration: In case of disputes between the Iraqi Ministry of Oil and a contracting company, the ministry resorts to international arbitration to resolve the conflict.

Importance of Supervision by the Iraqi Ministry of Oil on Oil Licensing Contracts

The supervision by the Iraqi Ministry of Oil on oil licensing contracts is of great importance as it contributes to:

• Protecting the interests of the Iraqi state: Supervision ensures that Iraq fully obtains its rights from oil licensing contracts.
• Ensuring companies' compliance with contract terms: Supervision helps ensure that companies comply with all contract terms, contributing to the execution of oil projects according to the required specifications.
• Preventing corruption: Supervision helps prevent corruption and illegal practices in the field of oil licensing contracts.
• Enhancing transparency: Supervision contributes to enhancing transparency in the process of concluding and implementing oil licensing contracts.

Proposals to Develop Supervision by the Iraqi Ministry of Oil on Oil Licensing Contracts

• Developing regulations and instructions: The Iraqi Ministry of Oil should develop its regulations and instructions related to supervising oil licensing contracts in line with global best practices.
• Capacity building: The ministry should enhance the capacities of its employees in the field of supervising oil licensing contracts through continuous training and development.
• Using modern technology: The ministry should use modern technology in the field of supervising oil licensing contracts to improve supervision efficiency.