|
LONDON (Dow Jones)--Norwegian oil company Det
Norske OljeselskapDNO ASA (DNO.NS) said Friday that
drilling operations in northern Iraq's Kurdistan
region would continue despite comments from Iraq's
deputy prime minister that the deal had not yet
received Baghdad's approval.
"It's clear that we have a legal valid agreement in
full compliance with the constitution," DNO Managing
Director Helge Eide told Dow Jones Newswires, adding
that drilling which began in November was
continuing.
He said that contact with the central government
over the matter would be handled by the Kurdistan
Regional Government.
DNO was one of the first oil companies to sign an
oil production sharing agreement after the U.S.-led
war in 2003. But the deal, which was signed with the
KRG, has provoked ire in Baghdad, where the oil
ministry says they have not been part of the
negotiations.
Deals such as these, where a regional government can
agree to and implement oil deals without Baghdad's
approval, don't bode well for the eventual central
management of Iraq's valuable oil sector, analysts
say.
"This could set a precedent and provinces in the
south might be tempted to do the same as the Kurds,"
said Muhammad-Ali Zainy, senior energy analyst at
the London-based Centre for Global Energy Studies.
On a more practical level, oil experts say the Kurds
lack the technical and managerial expertise needed
to go it alone.
The KRG has always maintained it has the authority
to negotiate and award oil contracts in its
territory for unexplored and undeveloped areas.
But earlier this week, Iraq's Deputy Prime Minister
Ahmad Chalabi told Dow Jones Newswires that
contracts negotiated by foreign oil companies with
the KRG independent of the oil ministry needed to be
reassessed in Baghdad.
"They can insist if they want to but the point is
they have to comply with the constitution," Chalabi
said.
"It's very clear in the constitution that oil
belongs to all the Iraqi people and this question
needs to be resolved," he said, adding that there
had been no communication from the KRG on the
matter.
According to article 109 of the Iraqi constitution,
oil and gas resources belong to all the people of
Iraq in every region. The constitution also states
that federal and regional governments should
together manage the resources as long as revenue is
fairly distributed.
Government officials in Baghdad have long held that
contracts signed without the approval of the federal
government should be declared void.
DNO signed the production sharing agreement with the
KRG in June 2004. Separately, the Norwegian company
has a memorandum of understanding with the Iraqi oil
ministry for a program training Iraqi oil officials.
Although northern Iraq's oil reserves aren't as big
as the giant southern fields around Basra,
geologists say the North still has good potential,
especially as the area is largely unexplored and
modern techniques like seismic imaging have never
been used in Iraq.
The KRG, a coalition government formed from the two
main Kurdish factions in Iraq, has already signed
production sharing agreements with companies
including Turkey's PetOil and General Energy,
Australia's Woodside Petroleum (WPL.AU).
In addition, the regional government recently signed
a memorandum of understanding for a field study and
further negotiations towards a PSA with Heritage
Oil.
The lack of a petroleum law and significant security
risks have kept large foreign oil companies from
investing in exploration and production in Iraq.
Dow Jones
Top |
® 