By Simon Webb and Amena Bakr

SHARJAH, United Arab Emirates, April 16 (Reuters) - Iraq's parliamentary oil and gas committee is seeking to revoke a multi-billion dollar gas deal signed by the oil ministry and Royal Dutch Shell ( RDSA - news - people ) last year, the committee's secretary said on Thursday.

Both the Shell deal and another multi-bilion dollar contract between Iraq and China's state-run CNPC were illegal because they had not been approved by parliament as required under Iraqi law, Iraqi MP Jabir Khalifa Jabir told Reuters in an interview.

Shell's deal was unconstitutional and detrimental to Iraq's economic interests, said Jabir, who worked for Iraq's state-run Southern Gas Company for 15 years.

"We are going to do everything we can to revoke this deal and to push Shell out," Jabir said. "Both these deals are illegal because they didn't go through parliament. The companies and their lawyers knew the old Iraqi oil law very well."

Any new deals Baghdad signs in bidding rounds underway would also be subject to revocation, Jabir said.

The oil ministry has said it does not need parliament's approval to sign new deals. Jabir said Iraqi law 97 clearly states new deals must be passed by parliament.

The committee had studied the preliminary Shell deal for the past six months and all members agreed it was illegal, he said.

Shell signed the agreement last September to capture gas which Iraq wastes through burning. But the deal has stoked opposition among MPs for giving Shell monopoly rights on future gas production in the south.

"This is bad for Iraq's economy," Jabir said. "Under the contract Shell has monopoly rights to all gas in Basra and the south. This is not right."

Jabir also criticised the lack of transparency in the deal's award, which came without a bidding round. It was unconstitutional as the local provincial government was not involved in the negotiations, he added.

The deal made no provision to prioritise domestic supply, he said, despite the oil ministry and Shell having initially said it would.

"There are fears Shell will just take the gas and export it rather than meeting increasing local demand," he said.

MORE SUBSIDIES?

The agreement gave Shell the right to sell the gas at international prices, he said. That meant that if Shell sold the gas domestically, Iraq would have to pay Shell international prices and then subsidise the price to industry and power users.

The alternative was to charge local customers international prices, which would put them at a disadvantage with competitors in other countries in the Gulf receiving cheap energy supplies.

"This is to the detriment of Iraq's economy," he said. "We can't pay Shell international prices and then finance the subsidies from the budget."

The committee would prioritise revoking the Shell deal before turning its attention to CNPC's deal, he said. The committee had less concern about the Chinese deal as it was less damaging to Iraq's economy, he added.

"If you have a deep wound on one hand and a cut on the other, you deal with the wound first," he said.

Jabir said he was in favour of foreign investment in Iraq's energy sector, but wanted the investment to be for the country's benefit and within the law. Iraq needs billions of dollars to overhaul and expand its dilapidated infrastructure.

A draft oil law that would set out the framework for foreign investment was unlikely to be approved this year, he said. The legislation has been stuck with feuding politicians for over two years.

"Too many people are involved, there are too many problems, and the oil minister is happy with the delay and can make decisions with no accountability," he said. "The oil ministry is withholding information from the committee. Is this democracy?"

(Editing by William Hardy)

Copyright 2009 Reuters

INTERVIEW-Iraq MPs seeking to revoke Shell gas deal -  Source