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PLANS by
a Norwegian energy company to produce oil in Iraqi
Kurdistan early next year have raised questions over
who controls Iraq’s vast petroleum resources.
DNO, an independent company based in Oslo, said that
a well drilled near Zakho in the Kurdish-controlled
(Kurdistan) northern region of Iraq had shown the
presence of oil. Further well tests are planned,
which, if successful, could lead to the first
barrels produced by a foreign oil operator in Iraq.
The Norwegian firm signed a deal in June 2004 with
the Kurdistan regional government, a
production-sharing agreement covering an area 250
miles north of Baghdad close to the Turkish border.
Stepping briskly into a potential legal and
political quagmire, the Norwegian firm’s gamble has,
so far, come good and preliminary studies of the
results from drilling the Tawke, No 1 well showed
five reservoir levels of oil.
DNO announced the results of its first well in Erbil
with representatives of the Kurdistan Regional
Government and the Iraqi Ministry of Oil in
attendance. Iraqi officials have suggested that the
Tawke field could have reserves of about 100 million
barrels.
Helge Eide, chief executive of DNO, said that he
expected differences between the Kurdistan
government and Baghdad could be smoothed over. “We
have a good dialogue and support from the oil
ministry in Baghdad,” he said.
DNO’s deal with Kurdistan was struck ahead of the
new Iraqi constitution, which has created only
further confusion among oil exploration companies as
it remains ambiguous about the ultimate ownership of
natural resources.
The oil majors, which include BP, Shell, ExxonMobil
and Total, have taken few initiatives in Iraq and
have no operations on the ground, in large part
because of security concerns but also as a result of
uncertainty over the legal status of any licence to
explore for oil.
The new Iraqi constitution gives both federal and
regional governments the power to cut oil deals,
providing that the resources are distributed fairly
in proportion to the population, a recipe for
endless wrangling.
Undeterred, the Kurdistan regional government has
been pushing oil deals aggressively to independent
operators willing to take political risks from which
the multinationals shy away.
Heritage Oil, a Canadian company, has signed a
memorandum of understanding to do reservoir studies
on several oilfields while another Canadian firm,
Western Oil Sands, is discussing developments in the
Sulaimaniyah area.
Kurdish officials reckon that unexplored reserves
within their territory could amount to 45 billion
barrels, a potential economic power base which gives
the Kurdish government confidence that a future
independent Kurdistan will be economically viable.
However, such ambitions will be jealously contested
by the central government in Baghdad.
The logical export route for Kurdistan’s oil is
through Turkey but the existing infrastructure, a
pipeline linking the old oilfields of Kirkuk with
the Turkish Mediterranean port of Ceyhan, has been
out of action since the end of last year because of
frequent attacks by insurgents and criminal gangs.
However, foreign operators are pushing ahead,
notably Terra Seis, a seismic surveyor that has 12
operations in Kurdistan working for five foreign oil
companies.
DNO’s 180 ft oil rig was imported in pieces by truck
from Turkey and assembled on site.
Great potential
Iraq has proven oil reserves of 115 billion barrels
— about 10 per cent of the world total and similar
to those of Iran — but its output is a fraction of
its potential
War and insurgency
have pounded the antiquated oil infrastructure.
Under Saddam Hussein Iraq produced 2.5 million to 3
million barrels a day but frequent attacks have
virtually shut down Iraq’s northern (Kurdistan)
export route to Turkey and foreign oil sales are now
confined to southern fields
In February, Iraq was producing 1.8 million barrels
per day, less than half the output of Iran
Oil industry experts reckon that Iraq could double
its reserves and output with the help of foreign
capital
http://business.timesonline.co.uk
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