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Kurds in Iraq strike 4 new oil deals,
angering Baghdad
4.10.2007
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October
4, 2007
Sulaimaniyah, Kurdistan region 'Iraq', --
Worsening a deep divide with Iraqi leaders, the
Kurdistan regional government has struck four new
oil exploration deals over the strong objections of
the Baghdad central government. The deals are the
latest effort by the Kurds to jump-start their oil
industry as national oil legislation languishes in
Parliament.
The new deals follow an agreement last month between
the Kurds and Hunt Oil Co. of Dallas that was
criticized as illegal by the Iraqi oil minister,
Hussain al-Shahristani. Kurdish officials, who have
said they want to be producing at least one million
barrels of new oil daily within five years, say all
the deals are consistent with the Iraqi
Constitution.
But the deals have aggravated tensions with the
Arabs who dominate the national government, calling
into question whether Iraqi politicians will ever be
able to work out differences on how to develop the
huge petroleum reserves.
The Kurds want the Iraqi Parliament to pass draft
legislation governing new oil exploration and the
allocation of oil revenue between the country's
Kurdish, Sunni and Shiite regions. But many in
Parliament object to the version favored by the
Kurds, and it is unclear how the Kurds' own regional
oil law, approved in August, will conform with
whatever might ultimately be approved by the central
government.
In particular, many Sunni Arab leaders object to the
production-sharing agreements being negotiated by
the Kurds, which call for companies to invest large
sums to find and produce oil and then award the
companies a portion of the profits later generated
by the oil fields.
The Kurds' new oil and gas exploration
production-sharing contracts were signed with
Heritage Oil Corp., a publicly traded Canadian
concern, and Perenco SA, a privately held French
company. The total initial amount invested is
expected to be $500 million, the regional government
said, and two other deals with "experienced
international companies" will be announced soon.
Heritage was awarded an exploration license for a
1,015-square-kilometer, or 392-square-mile, area in
the Sulaimaniyah Province of Iraqi Kurdistan.
Perenco was awarded a license for 2,358 square
kilometers along Iraq's northern border with Turkey.
If the exploration leads to oil production, Kurdish
officials said that in rough terms the deals call
for the companies to recover their costs and split
profits, with about 15 percent going to the
companies and 85 percent to the government. A
Kurdish official said it is expected to take three
to five years before any oil is produced.
In addition, the Kurdish government announced plans
to complete, within two years, two refineries that
are each capable of processing 20,000 barrels a day,
or enough to meet 30 percent to 40 percent of the
current demand in Iraqi Kurdistan for gasoline and
other refined products - easing reliance on imports
from Turkey and Iran. "We are desperate for fuel and
fuel products," a Kurdish official said.
In Baghdad, a spokesman for the Oil Ministry
criticized the new oil production contracts and
warned companies not to sign deals without the
blessing of the national government.
"Any contracts signed before the approval of the oil
law will be ignored or considered illegal," said the
spokesman, Assim Jihad. He added that the ministry
would take "rigid steps against those who ignore its
orders."
A senior State Department official in Baghdad has
also criticized the oil contracts with the Kurds as
having "needlessly elevated tensions" between the
Kurds and Baghdad.
A Kurdish official defended the deals, saying that
the eventual revenue would be shared with all Iraqi
regions and that any delays in signing exploration
pacts would only increase the time it will take to
get money for the country's treasury.
A Western executive involved in negotiations with
the Kurds said the regional government appeared to
be trying to "create a fait accompli" by signing so
many deals with foreign companies that the central
government has to eventually accept the provisions
sought by the Kurds.
"They are trying to increase the pressure to get the
draft oil bill out of" the Iraqi Parliament, said
the executive, who agreed to speak without his name
being used because he was not authorized to discuss
negotiations. "Some of these are relatively marginal
deals in the sense that they are not huge deals with
major international oil companies. But if they get
enough of them they feel they can put more pressure
on the federal government to get the law unstuck."
IHT
The White House on Wednesday
declined to criticize four
controversial oil deals inked by
Iraq's Kurdistan regional government in defiance of
criticisms from leaders in Baghdad.
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