|
The Race to Tap The Next
Gusher
Apr. 16, 2006
Kurdistan is rich in oil resources, and the Kurds
are ready to deal. But global oil giants have been
aced out by a small Norwegian outfit
For most of his life, Khadir honed the occupation he
learned as a child: fighting in the Kurdish militia
against Saddam Hussein's forces. He was jailed seven
times since the age of 14 and saw a favorite uncle
executed. Now, at 32, he is perfecting an entirely
new skill that could change this region as much as
have the wars in which he has fought: drilling for
oil. Since late November, he has toiled about 9 m
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 in
January, 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. Last week, Kurdish
officials announced that the rig outside Tawke would
begin producing oil early next year — Iraq's first
new foreign oil production since the U.S. invasion
three years ago. Turkish, British and Canadian oil
companies have been negotiating with Kurdish
officials in recent months to revive old oil fields
and drill new ones. "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." Because
Kurdistan — the region that comprises the three
northernmost provinces of Iraq — is seeing little of
the deadly mayhem evident around Baghdad, its
economy has the potential for sharp growth. But its
very success, as sectarian killings are pushing
other parts of Iraq toward civil war, could jolt the
country's precarious ethnic and political balance by
injecting sizable revenues and foreign investment
into an area which already has strong desires for
independence.
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 in
early 2004 negotiated the rights to drill in about
3,900 sq km, inking the contract in the final week
before Iraq's interim government took over from the
U.S.-dominated Coalition Provisional Authority.
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 highly risky move. Iraqi politicians remain
bitterly divided over who will ultimately control
the country's massive oil resources under its 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.
That wasn't 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 was that the sheep and
cows kept getting stuck in the stuff," Omar says.
So far 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 55-m rig
driven across the Turkish border in about 100 trucks
and then assembled it a few kilometers 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., has hit
several potential deposits of oil more than 3,000 m
underground. And a second DNO rig is planned to go
up nearby in June. 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. "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 field
east of Arbil, two Turkish firms are producing oil
for local consumption, and one 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 could soar within Iraq,
which depends almost completely on oil for its
exports. Some researchers believe the Kurds' oil
estimates are unrealistic, but geologist Plintz says
his research suggests that unexplored reserves
"could be among the biggest in the world." In
addition, more than 10 billion bbl. of proven
reserves lie underneath the city of Kirkuk, which is
situated outside Kurdistan but whose political
status is still disputed by Kurds. Though Kirkuk's
oil production has plummeted because of repeated
insurgent attacks, Kirkuk, like Kurdish fields,
would have huge advantages over other Iraqi sites:
its output could be piped a short distance to
Turkish refineries without passing through any war
zones.
Whether the gushers come in or not, Kurdistan is
already booming. On the border with Turkey, about a
half-hour drive from the DNO rig, it's clear
Kurdistan has become Europe's gateway to Iraq.
Trucks from Turkey, Austria, Bulgaria, Germany and
the Netherlands are backed up for many kilometers.
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 heavy security. Kurdish soldiers — or
peshmerga, as they are known — sit in tall
watchtowers along the perimeter, and civilian
vehicles may not enter 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
officials have agreed the company will be the first
European airline to fly to Arbil, with three Vienna
flights a week scheduled to start sometime this
year.
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 4.8-km 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, 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 320 km 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
showing serene rural scenes, using the slogan the
other iraq. 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 a U.S. 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 curb the Kurds'
growing economic clout and political autonomy. Most
Kurds don't seem to want any part of a greater Iraq
— especially while ethnic violence continues in
Baghdad. Large oil finds in the territory "would
bolster the sense on the street that the Kurds can
survive on their own," says the Western consultant
who did not want to be named.
Tawke's residents are focused on more basic problems
these days. Over the mutton, 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. Insurgents last year launched
more than 200 attacks on Iraq's oil facilities, and
have made more than 30 already this year. But Khadir,
who earns $500 a month as a oil-rig 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.
www.time.com
Top |
® 