SUBCOMMITTEE ON THE MIDDLE EAST AND SOUTH ASIA
GARY L. ACKERMAN, New York, Chairman
HOWARD L. BERMAN, California
MIKE PENCE, Indiana
DAVID SCOTT, Georgia
STEVE CHABOT, Ohio
JIM COSTA, California
JO ANN DAVIS, Virginia
RON KLEIN, Florida
JOE WILSON, South Carolina
BRAD SHERMAN, California
J. GRESHAM BARRETT, South Carolina
ROBERT WEXLER, Florida
JEFF FORTENBERRY, Nebraska
ELIOT L. ENGEL, New York
BOB INGLIS, South Carolina
RUSS CARNAHAN, Missouri
CONNIE MACK, Florida
SHEILA JACKSON LEE, Texas
GUS BILIRAKIS, Florida
DAVID ADAMS, Subcommittee Staff Director
HOWARD DIAMOND, Subcommittee Professional Staff Member
GREGORY MCCARTHY, Republican Professional Staff Member
DALIS BLUMENFELD, Staff Associate
SUBCOMMITTEE ON INTERNATIONAL ORGANIZATIONS,
HUMAN RIGHTS, AND OVERSIGHT
BILL DELAHUNT, Massachusetts, Chairman
RUSS CARNAHAN, Missouri
DANA ROHRABACHER, California
DONALD M. PAYNE, New Jersey
RON PAUL, Texas
GREGORY W. MEEKS, New York
JEFF FLAKE, Arizona
JOSEPH CROWLEY, New York
CLIFF STAMMERMAN, Subcommittee Staff Director
NATALIE COBURN, Subcommittee Professional Staff Member
PHAEDRA DUGAN, Republican Professional Staff Member
ELISA PERRY, Staff Associate
(III)


CONTENTS
Page
WITNESSES
Mr. Joseph A. Christoff, Director, International Affairs and Trade, General
Accountability Office ......
Mr. Tariq Shafiq, Consultant, Petrolog & Associates .......
Mr. Issam Michael Saliba, Senior Foreign Law Specialist, Middle East and
North Africa, Law Library of Congress .........
..........
LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING
Mr. Joseph A. Christoff, Director, International Affairs and Trade, General
Accountability Office ......
Mr. Tariq Shafiq, Consultant, Petrolog & Associates
Mr. Issam Michael Saliba, Senior Foreign Law Specialist, Middle East and
North Africa, Law Library of Congress ...
APPENDIX
The Honorable Sheila Jackson Lee, a Representative in Congress from the
State of Texas: Prepared statement
...
(V)


RECONSTRUCTION IN IRAQ'S OIL SECTOR:
RUNNING ON EMPTY?
WEDNESDAY, JULY 18, 2007
HOUSE OF REPRESENTATIVES,
SUBCOMMITTEE ON THE MIDDLE EAST
AND SOUTH ASIA, AND
SUBCOMMITTEE ON INTERNATIONAL ORGANIZATIONS,
HUMAN RIGHTS, AND OVERSIGHT,
COMMITTEE ON FOREIGN AFFAIRS,
Washington, DC.
The subcommittees met, pursuant to notice, at 2:04 p.m. in room
2172, Rayburn House Office Building, Hon. Gary Ackerman (chair-
man of the subcommittee) presiding.
Mr. ACKERMAN. The subcommittees will come to order.
Last March, our two subcommittees held a hearing on recon-
struction in Iraq where it became painfully obvious that none of
the major goals of United States reconstruction efforts had been
met. In particular, the oil sector, the engine of Iraq's economy, and
the source of 90 percent of its revenue continued to produce at well
below pre-war levels.
Three years ago the Coalition Provisional Authority set oil pro-
duction targets at 3 million barrels per day. Last year, according
to GAO, Iraq produced an average of 2.1 million barrels a day, and
this year Iraq is averaging only 1.9 million barrels a day.
In terms of oil specifically for export, Iraq produces 1.4 billion
barrels a day, 800,000 barrels per day below the goal, and 100,000
barrels per day less than last year. So 3 years after the CPA set
the initial target not only is Iraq not producing anywhere near the
goal, they are actually going backwards. At $50 a barrel, that is a
$40 million per day in lost revenue, $14.6 billion per year, or al-
most $45 billion less than expected since the targets were first es-
tablished 3 years ago. Where I come from $45 billion would buy a
lot of reconstruction, but the story gets worse.
Apparently between 100,000 and 300,000 barrels of oil per day
go unaccounted for. It is just gone. The Government Accountability
Office reported in May that over the last 4 years Iraqi oil worth
somewhere between $5 million and $15 million a day may have
been stolen, siphoned or maybe not even produced. It is surprising
the Iraqi people are not demanding that we bring the old crooks
back.
What GAO has uncovered here is that neither the Iraqis nor we
know even precisely how much oil is being produced. Unfortu-
nately, it is not just crude oil production where the targets are
being missed. The CPA also set production targets for natural gas
(1)


2006, Iraq spent less than 3 percent of the $3.5 billion it budgeted
for oil projects.
To address these many problems, we recommended that the Sec-
retary of State work with Iraqi ministries to do five things: (1) de-
velop an integrated energy strategy; (2) establish an oil metering
system; (3) develop financial management systems; (4) secure
greater donor funding; and (5) implement hydrocarbon legislation.
I will only provide a few comments on the hydrocarbon legisla-
tion, noting that your experts will follow me on this panel.
Iraq has yet to enact legislation that defines the distribution of
oil revenues and the rights of foreign investors. As shown in the
last chart on your far right, the government must enact four sepa-
rate but interrelated pieces of legislation, not just one. Iraq's cabi-
net has submitted only one of these to its Parliament. A framework
to establish the oil sector is management and oversight. The cabi-
net has not approved a draft revenue-sharing law. This law would
provide for the ownership of oil resources and the distribution of
revenues.
Two other laws are being drafted. One would restructure the
ministry of oil and the other would establish the Iraq National Oil
Company. Until all legislation is enacted, Iraq may have difficult
attracting the foreign investment it needs to modernize the oil sec-
tor. Passage of hydrocarbon legislation is one of 18 benchmarks the
United States expects Iraq to achieve, and as required by law, GAO
will provide Congress an independent assessment of Iraq's progress
in achieving these 18 benchmarks. We will issue our report on Sep-
tember 1.
Thank you, Mr. Chairman. That concludes my statement.
[The prepared statement of Mr. Christoff follows:]


10
However, poor security, corruption, and lack of unity and trust will likely impede
the implementation of the legislation.
In our May 2007 report, we recommended that the Secretary of State work with
the Iraqi government and particularly with the Ministries of Oil and Electricity to
(1) develop an integrated energy strategy for the oil and electricity sectors; (2)
expedite efforts to establish an effective metering system for the oil sector; (3)
develop fair and equitable hydrocarbon legislation, regulations, and
implementing guidelines; (4) expedite efforts to develop adequate budgeting,
procurement, and financial management systems; and (5) implement a viable
donor mechanism to secure funding for Iraq's future oil and electricity rebuilding
needs.
In commenting on our prior report, State agreed that all the steps we included in
our recommendations are necessary to improve Iraq's energy sector but stated
that these actions are the direct responsibility of the Government of Iraq, not the
Department of State, any U.S. agency, or the international donor community. We
recognize that these actions are ultimately the responsibility of the Iraqi
government. However, the U.S. government wields considerable influence in
overseeing Iraq stabilization and rebuilding efforts.
Background
Iraq's oil infrastructure is an integrated network that includes crude oil fields and
wells, pipelines, pump stations, refineries, gas oil separation plants, gas
processing plants, export terininals, and ports (see fig. 1). This infrastructure has
deteriorated significantly over several decades due to war damage; inadequate
maintenance; and the limited availability of spare parts, equipment, new
technology, and financing. Considerable looting after Operation Iraqi Freedom
and continued attacks on crude and refined product pipelines have contributed to
Iraq's reduced crude oil production and export capacities.
Page 4
GA0-97-1107T


not running due to interdictions on the Iraq-Turkey pipeline and new stabilization
plant. The Corps noted that if the lines and plant were in operation today, an
additional 500,000 barrels per day could be produced in northern Iraq.
The U.S. government has developed a number of initiatives to protect the oil
infrastructure and transfer this responsibility to the Iraqi government. Such
efforts include fortifying the infrastructure and improving the capabilities of
rapid repair teams and protection security forces such as the Oil Protection Force
and the Strategic Infrastnicture Battalions (SIB). The U.S. government has paired
these security forces with coalition partners and has trained and equipped the
SIBs. However, U.S. officials stated that the capability and loyalty of some of
these units are questionable. According to Department of Defense (DOD) and
Center for Strategic and International Studies reports, these security forces have
been underpaid, underequipped, and poorly led, and are sometimes suspected of
being complicit in interdiction and smuggling. Additional information on the
nature and status of these efforts and the SIBs is classified.
Corruption and Smuggling
Reduce Oil Revenues
U.S. and international officials have noted that corruption in Iraq's oil sector is
pervasive. In 2006, the World Bank and the Ministry of Oil's Inspector General
estimated that millions of dollars of government revenue are lost each year to oil
smuggling or diversion of refined products. According to State Department
officials and reports, about 10 percent to 30 percent of refined fuels are diverted
to the black market or are smuggled out of Iraq and sold for a profit. According
to State Department reporting, Iraqi government officials may have profited from
these activities. The insurgency has been partly funded by corrupt activities
within Iraq and by skimming profits from black marketers, according to U.S.
embassy documents. According to a June 2007 DOD report, a variety of
criminal, insurgent, and militia groups engage in the theft and illicit sale of oil to
fund their activities. For example, DOD reported that as much as 70 percent of
the fuel processed at Bayji was lost to the black market-possibly as much as S2
billion a year. As a result, the Iraqi Army assumed control of the entire Bayji
refinery, and equipment is being installed to prevent siphoning.
?The Special Inspector General for Iraq Reconstruction (SIGIR), Unclassified Summary of SIGIR'S
Review of Effort to Increase Iraq's Capability to Protect Its Energy Infrastructure, SIGIR-06-038
(Washington, D.C.. Sept. 27. 2006).
Anthony Cordesman, Center for Strategic and International Studies, Iraqi Force Developnent and
the Challenge of Civil War: The Critical Problems and Failures the U.S. Must Address Iſ Iruqi
Forces Are io Eventually Do the job (Washington. D.C.: Nov. 30. 2006). Department of Defense,
Meusuring Sulilily and Security in Iraq (Washington. D.C.: June 7, 2007).
Page 13
GA0-07-1107T


Figure 6: Status of Iraq's Hydrocarbon Legislation, July 1, 2007
Hydrocarbon
Framework
(oil and gas)
Financial
Resouces
(revenue-Sharing)
Restructuring
the
Ministry
of Oil
Establishing the
Iraq National ON
Company
(
102)
Proposed
legislation
1 year
February 26.
rau veted through
Shura Council
Cabinet gave
approval for
submission to
Parliament on
July 7, 2007
skaq negotiators
reportedly teached
agreement on text
but it has not vet
been submitted to
Cabirier for approval
Status/
progress
Negotiated drait text
has not been developed
Negotiated draft text
has not been developed !
-------
------
-
---
Key facts
To establish the role
of the INOC
• Considered the umbrella'
legislation
Estabiishes structures.
managarent, and oversight
of Iraq's oil industry
Annexos allocate ine
management of particular
petrcleum fields and
exploration areas in trag to
the Irao National i
Company, the Irac Ministry
of Oil, and the Kurdistan
Regional Government
Council of Ministers must
submi dra!! fuderal
revenue legislation to the
Council of Representai ves
regarding the
• Ownership of oil and
Das resources,
• distribution of its
revenues, and
monitoring of federal
revenue allocation.
To address
reorganization of the
Ministry of Ox, which
currently controls all
aspects of the oil and
gas industry
Source: CAO based on information from the State Department and Kurdistan Regional Government
Note: According to a State Department official, as of July 13, 2007, the annexes may have been
dropped from the hydrocarbon framework legislation because agreement could not be reached on the
allocation of petroleum fields and exploration areas. It remains uncertain how this reportedly
contentious issue will be resolved.
The draft hydrocarbon framework is the furthest along in the legislative process
and is currently before Iraq's parliament, according to a State Department and a
KRG official. According to these officials, it provides an overall framework but
lacks key details that will be addressed in the financial resources and other
legislation. The UN reported in early June 2007 that there had been no decision
on whether the hydrocarbon framework legislation would be voted on as a part of
a larger energy package with annexes and supporting legislation or voted on
Page 17
GA0-07-11071


34
this interrelates to the success of a constitutional order in Iraq. Is
that a fair-
Mr. CHRISTOFF. That is a correct statement.
Mr. PENCE. Could you expand on that?
Mr. CHRISTOFF. Yes. For example, I think some of the provisions,
the constitutional, you could call it a constitutional Congress or the
committee that still has yet to be formed and to report out on
changes to the constitution. You know, one of the important
changes that would have to be debated is the role of regions, and
the extent to which new regions are going to be allowed to be
formed, like a Shia region in the south.
Well, that bears into what would be the percentages in oil rev-
enue that would go to the regions versus the central government.
So if you don't have decisions in the constitution about clearly de-
federalism, that is going to bear on how do you deter-
mine whether the central government gets what percentage or the
regions get what percentage, so it is very interrelated.
Mr. DELAHUNT. Would my friend yield?
Mr. PENCE. I would be pleased to yield, Mr. Chairman.
Mr. DELAHUNT. If I understand you, Mr. Christoff, it makes little
sense to pass a hydrocarbon law in all of its aspects without having
the work of the constitutional committees accomplished as a pre-
requisite. In other words, how can the Iraqi Government pass a law
dealing with the management of its hydrocarbon resources and im-
plicated in that is an allocation among the regions when the con-
stitutional provisions that would order those or that would define
those regions are not in existence?
Mr. CHRISTOFF. Yes, an uncertified-
Mr. DELAHUNT. I mean, are we putting the cart before the horse,
to put it in the colloquial.
Mr. CHRISTOFF. I actually see lots of carts and lots of horses, and
it is not just-
Mr. DELAHUNT. What about this horse and this cart?
Mr. CHRISTOFF. That is one. That is one, but you also have to
what extent do you resolve the disposition of Kirkuk? To what ex-
tent do you have a census that would clearly define the populations
that would result in the percentage of revenue that those regions
are going to get?
So you have a whole host of issues, both constitutional and oth-
ers.
Mr. DELAHUNT. But the constitution that would create those re-
gions and hopefully resolve those issues, no action has been taken
by the Iraqi Parliament or the Iraqi cabinet on those issues, and
yet we are pressing the Iraqi Government to pass a hydrocarbon
act in a vacuum. That is my point. The more I examine this issue,
I just can't understand the logic in terms of the sequence here. Í
don't know whether you agree with me, Joe, and I thank the gen-
tleman for yielding.
Mr. PENCE. I am reclaiming my time. I would like the gentleman
to respond. I will pose this one question.
Mr. CHRISTOFF. I don't know what the sequence should be. I just
know that there are a variety of different laws and decisions that
either have to be made by the Iraqi Government or through the


36
its hems will bU.S. Constheen absolu
Mr. CHRISTOFF. But those require a debate.
Mr. DELAHUNT. Let me inform you I inquired of the Department
of State, and they don't have access other than what they discover
on the Web site of the KRG.
Mr. CHRISTOFF. Right.
Mr. DELAHUNT. The Kurdistan Regional Government.
Mr. CHRISTOFF. Right.
Mr. DELAHUNT. So what we have here is a non-transparent, and
it is my understanding from a variety of sources and reports that
the Iraqi Parliament has had no access to either model contracts,
so-called, or these annexes, and it appears to be dealing in a blind,
if you will. Well, let me forego that, and—
Mr. ACKERMAN. Would the gentleman yield for just a moment be-
fore he goes on?
Mr. DELAHUNT. Yes.
Mr. ACKERMAN. I wanted to just clear something up to get a bet-
ter understanding so that there is either a sense of hope or an un-
derstanding that what was being offered is not necessarily a sense
of hope.
When the legal questions are resolved as far as the oil law and
its implementation and everything, is the suggestion is that these
problems will be cleared up and resolved because one might note
that since the U.S. Constitution was ratified, as I am advised it
was in 1789, there has been absolutely no theft of anything in
America?
What makes us think that posting the Iraqi constitution in front
of the pipelines will prevent the kind of thing that is going on now
with these billions of dollars benefiting everybody except the people
for whom it is intended to benefit, the people who own those re-
sources? Why would this stop with the passage of a law if the im-
plementation is going to be what it is now?
Mr. CHRISTOFF. I am gong to give you two comments.
First, the benchmark says enact, so you can enact. Even if you
enact all four, you still have to develop implementing regulat
that put details behind those laws. That is going to take awhile.
The second question is in terms of the corruption, I think one
thing that the framework— ..
Mr. ACKERMAN. Is the problem the details behind the laws or the
criminals that are not behind the bars?
Mr. CHRISTOFF. Well, I want to relate those too because the cor-
ruption that we see now is being addressed in the hydro
framework because there is a great deal of accountability and
transparency procedures. Iraq has to provide details and all the
contracts it lets, the royalties, the revenues, so there is an account-
ability provisions in the framework itself.
Mr. ACKERMAN. And people won't violate the law in that in-
stance? I mean, why aren't the American advisors telling the Iraqis
what to do to eliminate this as if there were a constitutional resolu-
tion, as if there were-
Mr. CHRISTOFF. Well, I am trying to give you some hope.
Mr. ACKERMAN. I would like some plans better than some-I
mean, I like hope. I like prayer, but I would like better on plans,
and I don't see them. I don't see anybody figuring out how to get
the bad guys, and I don't see anybody attempting, and I don't see


38
Qatar, Bahrain, Kuwait. I have seen countries of fabulous develop-
ment. I represent Hilton Head Island. When I visit these countries,
I feel like I am visiting Hilton Head Island on steroids. There
should be such opportunity to wisely use the oil resources of the
Middle East to benefit the people who live in the country, and in-
deed I have seen it, and I hadn't been to UAE, I haven't been to
Saudi Arabia, but obviously we know that all of these nations are
very modern, I think progressing.
So it is really frustrating to me the report that you have given
although I put it in the context, as you indicated, that the govern-
ment that we are dealing with came about a year ago, May 2006,
and our chairman just correctly referenced that our constitution
was adopted in 1789. It took the United States 13 years to ulti-
mately evolve the form of government that we so much appreciate
today. But here we are in just a little bit over a year in Iraq.
I am very pleased that, and I noted with interest that there was
a GAO report of May 2007, and you have five points and you have
reiterated those today, but I would like for you to further explain
the first one because I think that is the basis of what we are look-
ing for, and that is that the ministries of oil and electricity would
develop an integrated energy strategy for the oil and energy sec-
tors.
Can you explain what you mean by that?
Mr. CHRISTOFF. Yes, absolutely. Those two sectors are without a
doubt interrelated. The electricity plants need to have fuel that
comes from the ministry of oil. Similarly, the ministry of oil needs
to have electricity to produce the oil throughout the country, run
the pipelines.
What we found in our research, as well as talking to the advisors
for those two ministries, is that those two ministries, number one,
they don't get along very well, and number two, there really isn't
an integrated plan. The ministry of electricity does have a long-
term plan, about a 10-year plan in which that minister specified
the kinds of projects that he needs in order to achieve greater elec-
trical output. The minister of oil doesn't have a comparable plan.
So right now they are at different levels, but more importantly,
they had to have an integrated approach in order to help the coun-
roduce more oil and more electricity.
Mr. WILSON. And as we look at the different sectors, are we talk-
ing about public ownership, private ownership, public/private?
What is the potential of recruiting foreign oil companies to invest,
to develop the expertise, and the infrastructure? What is the plan-
ning for that, if any?
Mr. CHRISTOFF. Well, I think that is the debate in terms of the
different drafts of hydrocarbon legislation for the oil sector: What
is the appropriate role of an Iraqi National Oil Company? Do you
want a nationalized approach or do you want to invite in foreign
what should be in the hydrocarbon legislation.
Mr. WILSON. And in looking at the countries identified-Kuwait,
Qatar, Bahrain—what types models did they use? Are those state
or are they-
Mr. CHRISTOFF. Saudi Arabia is state. I don't know of the other
ones. But I think for Iraq, when you look at where they need to


50
STATEMENT OF MR. ISSAM MICHAEL SALIBA, SENIOR FOR-
EIGN LAW SPECIALIST, MIDDLE EAST AND NORTH AFRICA,
LAW LIBRARY OF CONGRESS
Mr. SALIBA. Thank you, Chairman Ackerman, Chairman
Delahunt, Ranking Members, and all members of the two sub-
committees.
I am honored to be here today to testify about the legal implica-
tion of the Iraqi oil and gas draft legislation, better know as the
framework hydrocarbon law. This legislation can be summarized as
intending to: (1) create an independent body to make final decision
on all matters related to oil and gas activities in Iraq; (2) open the
Iraqi oil and gas sector to private investors; (3) expand the role of
the Iraqi Government in the management of present and future oil
discoveries.
The draft law provides for the creation of a Federal oil and gas
council vested with the authority to approve contracts, including
what is known in the industry as production sharing agreement, or
PSA.
A PSA gives the contractor an equity ownership in the oil reserve
and is used in exploration and production contracts where the con-
tractor is at risk of losing all his investment money if no commer-
cially exploitable quantities of oil or gas are found within the con-
tract area. It is uncommon to use a PSA type contract for discov-
ered but not yet developed oil.
The proposed law divides the oil resources in Iraq into three cat-
egories: (1) the presently producing fields identified in Annex 1; (2)
discovered but not yet developed fields identified in Annex 2 and
3; (3) prospective exploration areas identified in Annex 4.
The draft law locates the fields in Annex 1 and 2 to the Iraq Na-
tional Oil Company, INOC, and the fields in Annex 3 to the re-
gional authorities. The ministry of oil, INOC, and each of the re-
gions, each within its respective jurisdiction, may initiate negotia-
tions and sign initial contracts related to oil and gas activities in
accordance with instructions and model contracts as may be ap-
proved by the Federal created council.
The initial contract shall be submitted to the Federal council for
review. If the Federal council expresses no objections or if it fails
to act within a prescribed period of time, the contract will become
binding by default. If there is fault with the initial contract, the
Federal council may object to it only by a two-third majority vote
of the members present.
The role of the Federal Government in managing future and un-
developed oil discoveries raises a potential constitutional issue. Ar-
ticle 111 of the Iraq constitution stipulates that oil and gas existing
in all of Iraq are the property of the Iraqi people. This implies that
the Federal Government should have the power to regulate and
age all oil and gas activities. However, Article 110, 112 and
115 of the constitution suggests otherwise.
Article 110 enumerates the power exclusively reserved to the
Federal Government, but none is related to oil and gas. Article 112
lows the Federal Government to manage only the presently oil-
producing fields, and distribute the revenue equitably among all
geographic areas of Iraq.


57
Mr. DELAHUNT. They are?
Mr. SHAFIQ. I should think so. They are all over the country, and
they contain very high potential. I have in the past estimated Iraq
future potential to be in the region of 215 billion barrels, and these
should recover most of that potential.
Mr. DELAHUNT. And what you have been saying, sir, you in Lon-
don have been saying is that at this point in time that is unneces-
sary because there are adequate existing supplies in areas that
have been explored and discovered but not producing. Is that cor-
rect?
Mr. SHAFIQ. Well, in oil, what we call proven reserves are the
stored oil in the drained fields, and in Iraq we have some 115 bil-
lion today— .
Mr. DELAHUNT. Okay.
Mr. SHAFIQ [continuing). Scattered or housed in 80 oil fields.
Some of these, in fact, only 20 are under current being produced.
Mr. DELAHUNT. And that will go on for 10 more years.
Mr. SHAFIQ. Sorry?
Mr. DELAHUNT. And that will go on for 10 more years. As you
said, a rush for exploration contracts at this particular juncture
would be viewed as mortgaging the reserves of future generations
and it would provide fuel to the view that the war was for oil.
Mr. SHAFIQ. I would, yes, be prepared to defend that argument.
Mr. DELAHUNT. Thank you.
Mr. ACKERMAN. Thank you very much.
Mr. Saliba, very briefly?
Mr. SALIBA. I would just add, Mr. Chairman, you are right but
also Annex 1 and 2 could be also optioned off, not only Annex 4.
Could be under the law. In other words, the law permit that.
Mr. SHAFIQ. May I intercept at this point?
Mr. ACKERMAN. Briefly, and we'll come back to this.
Mr. SHAFIQ. These discovered fields, which are being produced or
shall be produced by the international oil companies, they shall not
go for option. The National Oil Company has the jurisdiction to get
international oil companies on service contract to help them with
the management and technology.
Mr. ACKERMAN. Thank you. Mr. Rohrabacher.
Mr. ROHRABACHER. Thank you, Mr. Chairman and let me just
note that I was a little bit late today so I didn't have a chance to
say happy birthday to Congressman Delahunt.
Mr. DELAHUNT. Thank you.
Mr. ROHRABACHER. Who is my fearless leader of my sub-
committee, and no one ever thought he would last this long.
[Laughter.]
To the question at hand, I would just like to know whether or
not the Government of China or any Chinese companies have had
any type agreement? Has there been any deal with them over the
oil that will be produced in Iraq? Either or both of you.
IBA. I believe there were some contracts prior to the 2003
from the Saddam era. There were some contracts. My under-
standing-
Mr. ROHRABACHER. There has been no contracts with the Chi-
nese since for this new development of oil?
Mr. SALIBA. I have no information about that.


58
Mr. ROHRABACHER. Do you have any, sir? Do you have any?
Mr. SHAFIQ. Are you addressing me, sir?
Mr. ROHRABACHER. Yes, I am.
Mr. SHAFIQ. China has had a contract during the Saddam re-
gime, which is a PSA, by the way, contract. However, what is ex-
pected and I think this is on the way, that these contracts need to
be reformed to conform to the present petroleum law before they
can proceed and be given a life injection.
Mr. ROHRABACHER. Let me just note for the record, Mr. Chair-
man, that I did vote with the Democrat alternative that suggested
that a certain amount of oil revenue in the future by Iraq should
be dedicated to paying back the expenses to the United States Gov-
ernment for what we have expended here for the past few years,
and I would hope that the people of Iraq understand that whether
you say this war was for oil or not—that there has been a tremen-
dous expenditure of treasure on the part of the United States, not
to even mention the blood and value of our people, and I would
hope that in the future that if there is oil production in Iraq, that
the people of Iraq will be mindful that this is a great cost to the
United States and we deserve to be treated better than the Chinese
when it comes to this type of bidding.
So thank you very much.
Mr. ACKERMAN. You are very welcome.
The chair will note that your voting record has much improved.
[Laughter.]
And your—
Mr. DELAHUNT. But it has got a long way to go, Mr. Chairman.
Mr. ACKERMAN. It does, but he is indeed becoming more and
more sartorially splendorous.
Just quickly one word answer, one number answer, and then we
are going to adjourn and conclude the hearing for today, and both
chairs will confer as to whether or not we want to have a follow-
up hearing on this matter.
On a scale of one to ten, with zero being the lowest, and ten
being the highest, what is the possibility under this proposal that
there will be high corruption within the oil and gas industry? Mr.
Saliba, pick a number.
Mr. SALIBA. All I can say, Mr. Chairman, that the law as written
it is very open to any type of corruption if the people in charge
want to do that.
Mr. ACKERMAN. High possibility.
Mr. Shafiq?
Mr. SHAFIQ. Really that is a very difficult one to decide on, but
the rules of the game are open to malpractice, and as such I would
give it six out of ten that there can be malpractice.
Mr. ACKERMAN. Thank you both very much for your expertise
and the time you have dedicated to helping us in our deliberations.
The panel is dismissed with the thanks of both subcommittees, and
the hearing is concluded.
[Whereupon, at 3:45 p.m., the subcommittees were adjourned.]