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Kurdistan is rich in oil
resources, and the Kurds are READY TO DEAL. But U.S.
firms have been aced out by a small Norwegian
outfit.
For most of his life, Khadir has honed the
occupation he learned as a child: fighting in the
Kurdish militia against Saddam Hussein's forces. He
has been jailed seven times since he was 14 and has
seen a favorite uncle executed. Now, at 32, he is
perfecting an entirely new skill, which could change
this region as much as the wars in which he has
fought have: drilling for oil. Since late November,
he has toiled about 30 ft. aboveground on the first
derrick erected in Kurdistan in decades, by a
Norwegian outfit using a Chinese rig, of all things.
From the top, there is a panoramic view of the hills
around his tiny village of Tawke, where 30 families
eke out a meager living herding sheep. It hardly
looks like the location for a major economic boom.
"We are poor," he says, sitting on his bunk during a
break between shifts last month, when TIME was
invited for a rare visit to the oil operation. "We
have nothing."
But that could soon change--perhaps dramatically,
according to oil engineers who have surveyed the
region. Sheltered from the deadly mayhem around
Baghdad, the economy of Kurdistan, the region that
comprises the three northernmost provinces of Iraq,
is already showing signs of vigorous growth.
Turkish, British and Canadian oil companies have
held talks with Kurdish officials in recent months
to revive old oil fields and drill new ones.
Oil has the potential to jolt Iraq's precarious
ethnic balance by injecting sizable revenues and
foreign investment into an area about twice the size
of New Jersey. Much of the work is still
exploratory, but Western engineers and Kurdistan's
Regional Government believe that huge riches could
lie underneath. Exploration had been dormant for
decades--the region first languished under Saddam's
oppressive rule and then was isolated from Baghdad
for 12 years after the 1991 Gulf War. "There's a
race on to get fields into production," says a
Western consultant in Kurdistan, too fearful for his
safety to be named. "People are very, very
optimistic."
Ironically, the first winner isn't an oil giant from
the "coalition of the willing" but DNO ASA, a small
company traded on the Oslo Stock Exchange. DNO
negotiated the rights in early 2004 to drill in
about 1,500 sq. mi., inking the contract in the
final week of the U.S.-run occupation of Iraq. DNO's
managing director, Helge Eide, said he felt he "had
to do it before the interim government came in,"
fearing Iraq's new rulers might strip the Kurds of
rights to negotiate their own energy deals. It was a
risky move, since politicians were bitterly divided
over who would control Iraq's massive oil resources
under a new constitution. Yet as that argument
raged, DNO quietly hired the seismic company Terra
Seis (Malta) Ltd. to survey its area. The results
were stunningly clear. "We could tell very quickly
that there was structure containing hydrocarbons,"
says Kevin Plintz, a Canadian geophysicist who owns
Terra Seis and oversaw the work.
That wasn't all too surprising in Tawke, where
generations have watched oil seep out on the
surrounding hills and turn to a slick black film in
the gnawing winter cold. Sitting cross-legged on his
living-room carpet over a lunch of mutton, village
chief Tahir Ezeer Omar remembers that when he was
10, a German visitor told his grandfather that the
oil in the hills "was like gold, that it would
someday create wealth for us." The locals were
unimpressed. "All we knew is that the sheep and cows
kept getting stuck in the stuff," Omar says.
The Norwegians' political gamble seems to have paid
off. Last October Iraqis ratified a constitution
giving each region the right to cut oil deals--the
most bitterly fought-over item during months of
wrangling--while allowing Baghdad to divide the
revenues equitably between regions. Kurds will get
17%, their estimated portion of Iraq's population.
As Iraqis voted, DNO had a 180-ft. rig driven across
the Turkish border in about 100 trucks and then
assembled it a few miles inside Iraq, near Tawke.
The rig--owned and operated by the Great Wall
Drilling Co., a subsidiary of China's state-owned
National Petroleum Corp.--is expected to hit the
pool of oil at about 10,000 ft. Since it will reach
that level perhaps only next month, DNO has tried to
tamp down soaring expectations. Eide says that
although there is "movable oil, we still don't know
how much."
Such measured comments have not stopped the
excitement whipping across Kurdistan, maybe because
the presence of a rig bespeaks a boom to come. "For
us, new wells are very, very important," says Falah
Mustafa Bakir, senior aide to Kurdish Prime Minister
Nechirvan Barzani, over coffee in Kurdistan's
capital, Arbil. "It is the future, our means of
prosperity." Sarbez Hawrami, CEO of Kurdistan's
government-run Oil & Gas Petrochemical
Establishment, says "about seven British companies"
have approached him to discuss deals. Terra Seis now
has 12 seismic machines in Kurdistan working for
five oil companies, with a list of others waiting
for its services. In the 40-year-old Taq Taq oil
field east of Arbil, two Turkish firms are producing
oil, and one of them is drilling three new wells.
Last September Canada's Heritage Oil signed an
exploration deal. "There were always plans to
produce oil in Kurdistan, but there were always
objections" from Baghdad, says George Yacu, a Kurd
who served in Saddam's Ministry of Oil for 30 years
until 1999 and is now oil-and-gas adviser to
Kurdistan's regional government.
Kurdish officials estimate their unexplored oil
reserves at about 45 billion bbl. If that's
accurate, Kurdistan's power will grow within Iraq,
which depends almost completely on oil exports. Some
researchers cast a wary eye on the Kurds' claims,
but geologist Plintz says his research suggests that
unexplored reserves "could be among the biggest in
the world." An additional 40 billion bbl. of
reserves are in the city of Kirkuk, which lies
outside Kurdistan but whose political status is
still disputed by Kurds. Kurdish oil would have huge
advantages over Iraq's other fields: it could be
piped a short distance to Turkish refineries without
passing through war-torn areas.
Gusher or not, the region is booming. On the border
with Turkey, about a half-hour drive from the DNO
rig, Kurdistan has clearly become Europe's gateway
to Iraq. Trucks from Turkey, Austria, Bulgaria,
Germany and the Netherlands are backed up for miles
and carry goods from across the continent. Sea cargo
from Dubai is diverted through Jordan, Syria and
Turkey before reaching Kurdistan, where it is
transferred to Iraqi trucks before proceeding to
Baghdad. That route is the only choice: driving
north through Iraq from the Persian Gulf is too
dangerous.
As one flies into Arbil, the sole sign of war is the
airport's security. Kurdish soldiers--or peshmerga,
as they are known--sit in tall watchtowers posted on
the perimeter, and civilian vehicles are kept
outside the airport gates, where baggage searchers
wear ski masks to hide their faces. Flights from the
new Kurdistan Airlines and other carriers arrive
directly from Istanbul, Frankfurt, Dubai and Beirut.
Austrian Airlines will add a Vienna flight next
month.
That's just the start. A sprawling $200 million
airport is being built on the existing grounds and
is scheduled to open next year. Its three-mile
runway will be wide enough to land the new Airbus
380--or, for that matter, the space shuttle, boasts
Zaid Zwain, Kurdistan's director of civil aviation.
"Imagine, people used to fear the sound of jets
because of the bombing," he says, standing on the
vast, still unpaved runway.
Indeed, the sensation of not being in Iraq is a key
factor in Kurdistan's boom. Almost no Iraqi flag
flies, and fewer than 1,000 U.S. soldiers are
deployed in the territory. In the lobby of Arbil's
only five-star hotel, which is filled with American
and European businessmen discussing prospects, the
buzz in the crowd has one persistent theme: in the
world's most dangerous country, foreign businesses
can work safely by basing their Iraq operations in
Kurdistan rather than 200 miles south in Baghdad.
"For anybody wanting to do anything in Iraq today,
the entry point is Kurdistan," says Magne Normann,
DNO's senior vice president and Iraq project
director. "It's a stepping-stone for moving into the
rest of Iraq when the time is right." Last November
a television campaign funded by the Kurdistan
Development Corp. was launched on U.S. networks with
the slogan "The other Iraq" and languid rural scenes
that contrasted sharply with the war-ravaged Iraq on
the news. Still, that message has not translated for
some. "People in the States think I'm living in the
desert, one step ahead of someone who wants to put
me in an orange jumpsuit," says Harry Schute, a
consultant to Kurdistan's Interior Ministry who was
deployed to Iraq in 2003 as an Army reservist.
Yet keeping Kurdistan calm requires a heavy military
force. TIME traveled four hours north from Arbil to
DNO's rig in an armored vehicle, on a road marked by
several peshmerga checkpoints. DNO asked TIME not to
publish its Kurdish employees' real names for fear
they would be attacked for working for a foreign oil
company. (Khadir is not the oil worker's real name.)
Kurdistan's fragile peace could end quickly if
Baghdad's government tries to rein in the Kurds'
economic clout and political autonomy. Most Kurds
don't seem to want any part of a greater Iraq. "Even
when people talk about 'northern Iraq,' I feel
provoked," says Bakir, the Kurdish Prime Minister's
aide, who believes that many Baghdad officials are
unhappy about Kurdistan's oil hunt. The majority of
Kurds still hope that Kurdistan will be independent
and that large oil finds in the territory "would
bolster the sense on the street that they can
survive on their own," says the Western consultant
who did not want to be named.
These days there are more basic issues of survival
at stake, however. Over the lunch of mutton in Tawke,
Normann asks Omar, the chief, and the rig's star
worker, Khadir, how the company can help the
villagers. Omar says they need a water well and 50
desks for the tiny village school. Away from the
chief, Normann says he knows that such goodwill can
help secure the rig's safety from possible attack.
Iraqi officials last year counted more than 3,000
insurgent attacks against the country's oil
facilities and workers. But Khadir, who earns $500 a
month as a roughneck--in a village of poor sheep
farmers-- says an attack against DNO would surely
fail. "Everyone in the village would protect the
company, even the kids, because this oil is our
future," he says. And while DNO waits for the oil to
flow, it seems likely that Tawke's children may soon
sit in class at desks.
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