By Rania El Gamal
BASRA, Iraq, Dec 5 (Reuters) - Officials in Iraq'ssouthern oil hub Basra are trying to cancel a $17 billion Shellgas deal because they want a bigger say, highlighting thepressure on central government to ease its control over theprovinces.
Basra, where dozens of international oil companies signed upto develop some of Iraq's largest oilfields, is increasinglyrestless with the slow pace of development in the province andwants more control over its natural resources and revenues.
Demands for more provincial power have simmered for years inIraq, split by ethnic, sectarian and tribal tensions. But theBasra push and an autonomy drive from Salahuddin provincethreaten to stir tensions as the last U.S. troops withdraw.
The final contract with Royal Dutch Shell andMitsubishi to capture flared gas in three southernIraqi oilfields was signed on Nov. 24 despite objections fromthe Basra local council that it was not included in talks or thedeal's signing.
Officials from the Basra Provincial Council filed a lawsuitagainst the Iraqi Oil Ministry on Nov. 25 demanding thecancellation of the gas agreement.
"In principle, we don't have any problem with developing thegas but when the contract is signed, there has to be an articlethat shows the provincial council has agreed ... Unfortunately,we did not know anything about this contract," said Sabahal-Bazouni, head of the Basra Provincial Council.
"Basra is the most suitable province to become an autonomousregion."
Regional autonomy would give the province more power overfinances, administration and laws, and an upper hand insupervising public property, which could loosen Baghdad's gripon the oil and gas sector.
The legal case is unlikely to deter Shell and delay theproject, but it raises concerns about future disputes over oiland gas rights in Iraq, which is struggling to rebuild afteryears of violence just as Washington prepares for a full troopwithdrawal by the end of December.
"Just as the constitution gave rights to the region, it alsogave similar rights to the producing provinces ... Today, theKurdish region signs a deal with ExxonMobil and the centralgovernment objects, it is double standards," said Bazouni.
Minority Kurds in the north of Iraq have enjoyedsemi-autonomy for years since Western powers imposed a no-flyzone after the 1991 Gulf War. The Kurdish north is now seen as amodel for other regions seeking more autonomy.
Iraqi Kurdistan was able to attract foreign investment andprovide its residents with better security and living standardsthan in the rest of Iraq, where bombings and power cuts are apart of citizens' everyday lives.
But the Kurdistan Regional Government (KRG) and Baghdad arelocked in a row over land and oil. The central government hasobjected to a recent deal between the KRG and U.S. oil giantExxonMobil to explore for oil in the northern region.
Despite that, officials in Basra look to the KRG'sexperience and blame the lack of progress on political wranglingin Baghdad and rivalry among the Shi'ite Muslim, Sunni Muslimand Kurdish parties, each jostling for more power.
"Part of what drove us to demand regional autonomy is thatpolitical problems are usual in Baghdad not in Basra, where thegoverning parties are a known quantity," said Ghanem Abdul-Amiral-Maliki, a member of Basra Provincial Council.
"It is clear that the Kurdistan region is stable to a largedegree because the governing parties there are a known factor... In Baghdad, everyone is trying to please his own party onthe account of others. We want to get rid of the politicalinfighting in Baghdad by setting up a region."
SHARE OF OIL WEALTH
Provinces need a public referendum and parliamentaryapproval to attain regional autonomy. Prime Minister Nurial-Maliki, who took part in writing the constitution in 2005,supports powerful central government.
His government has tried to quieten the autonomy movement,partly out of concern that it could lead to instability as theU.S. troop withdrawal picks up pace. The remaining 10,000 troopsare scheduled to leave before Dec. 31.
In October, the mainly Sunni Salahuddin provincesymbolically decided to declare the area autonomous. The movewas criticised by Maliki.
In the mainly Shi'ite oil hub of Basra, autonomy talk hasbubbled for years. Basra sent a formal request for autonomy morethan a year ago, but has had no response from Baghdad.
The southern city used to be called "The Venice of theMiddle East", but now, Basra's crisscrossed canals are filthypools of stagnant water filled with heaps of rubbish.
Roads are damaged and only a few hours of electricity areprovided every day.
Most of Iraq's oil exports come from the fields aroundBasra, but residents are fed up with shortages of power, water,jobs and housing. They complain they have seen little benefitfrom the oil wealth.
"Federalism is the solution. It has been eight years andBasra is still the same. The central government was not able tosolve the problem of the electricity, water and other servicesin Basra," said Raied Khoudair, 34, a government employee.
"Until when Basra will remain the cow that Iraq milks foreverything, and gets nothing from Iraq? We see the developmentin the Kurdistan region and the prosperity they live in, we areno less than them." (Additional reporting by Aref Mohammed; writing by Rania ElGamal; editing by Elizabeth Piper)