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The struggle for Iraq's oil flares up as Kurdistan
open doors to foreign investors
7.8.2007
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August 7, 2007
Sulaimaniyah, Kurdistan region (Iraq), -- At
the end of a rough dirt track, on a sun-baked
hillock once the domain of scorpions and snakes,
squats an odd settlement of caravans, generators and
drilling rigs that is at the heart of the battle for
Iraq's oil.
"Welcome to Texas, Kurdistan," said Karim Ali, as
his taxi bounced to the gates of the Taq Taq
oilfields, on the undulating plains of Koi Sanjaq,
some 80 miles south-east of Erbil. "Soon we'll all
have big hats and cigars like them," he said,
nodding at a group of oil workers passing by on a
pickup truck.
Like many Iraqis, Karim appeared convinced that the
country's vast reserves of crude, the bedrock of its
economy, were about to be siphoned off by major US
oil corporations. The presence of "foreigners" here
at Taq Taq merely cemented his certainty.
With the Bush administration pressing the Iraqi
government to pass a new hydrocarbons law, there are
widely voiced assumptions that it will bulldoze the
oil industry into privatisation, and that foreign
firms - meaning US ones - will unfairly reap the
rewards. A survey published yesterday by a group of
British and American NGOs suggested most Iraqis
oppose plans to open the oilfields to foreign
investment.
Unlike his compatriots, however, Karim, a Kurd from
Sulaimaniyah, was not perturbed at the thought.
"They [the Americans] are our friends and they
deserve it for getting rid of Saddam," he said.
"Besides, when oil was in the hands
of Baghdad, it never meant anything other than bombs
and bullets for us."
In fact there are no Americans at Taq Taq. The
operation is being managed by TTopco (the Taq Taq
Operating Company), a joint venture between Genel
Energie, a Turkish company, and Addax Petroleum, an
independent exploration and development company
quoted on the London and Toronto stock exchanges.
The closest thing to a Texan oilman among the 200 or
so international team members is Bill, the beefy rig
manager, who in his hard hat could pass for John
Wayne's Red Adair character in Hellfighters. When
not burrowing for oil in Kurdistan, Bill farms sheep
in his native Australia.
The Taq Taq field promises to be the most lucrative
new oil development in Iraq since the fall of Saddam
Hussein. The three wells sunk since drilling began
in May 2006 have penetrated valuable deposits of
high-quality crude oil. Within five years it could
be producing as much as 200,000 barrels a day, says
TTopco's general manager, Les Blair.
But the trouble for some in Baghdad is that the
contract for the Taq Taq operation is one of several
exploration and development projects in the
self-rule region that have been negotiated and
signed by the Kurdish authorities, independently of
central government.
Another more advanced development at Tawke, near the
northern Kurdish city of Duhok, is being run by a
Norwegian independent, DNO. The firm recently
announced that it was ready to begin exporting the
oil it had discovered. It would be the first new
field in Iraq to do so since the US invasion in
2003.
The much-delayed hydrocarbons legislation, which was
supposed to have gone before the Iraqi parliament
before its summer recess, was one of the main US
benchmarks for Iraq's ethnic and sectarian
communities to heal their divisions.
Likewise, many Iraqis are banking on oil as the
country's best chance to guarantee economic and
social stability.
Instead, the protracted negotiations over the law
have underlined the deep mistrust between Shia and
Sunni Arabs and Kurds in the national unity
government as well as their mutually contradictory
political visions for post-Saddam Iraq. The struggle
for Iraq's oil is not simply the one often depicted:
war-weakened Iraqis versus rapacious western oil
moguls. "It is a clash not just of politics but also
of investment culture, one that mirrors the broader
and crucial debates on Iraq's future," said Bill
Farren-Price, deputy editor of the Middle East
Economic Survey, an oil industry newsletter.
The Kurdistan region's 4 million inhabitants live
atop what Ashti Hawarami, natural resources minister
in the Kurdistan regional government (KRG),
estimates to be at least 25bn barrels of oil. Mr
Hawrami told the Guardian that he wanted the region
to produce 1m barrels a day in five years' time. And
to achieve that target, Kurds, who have historically
been kept out of the Iraqi oil sector by central
governments, must throw open their doors to outside
investors, he said.
Yesterday, in a nudge to their counterparts in
Baghdad who have taken a summer break, the
Kurdistan parliament in Erbil
passed its own petroleum law. It has
also listed 40 exploration blocs in the Kurdistan
region it is putting out for tender.
"We do not want to be hobbled by the political
paralysis in Baghdad," said Mr Hawrami. "We believe
that the production -sharing agreements are the best
way to move swiftly forward and help not just the
Kurds but all Iraqis." The operations at Taq Taq and
Tawke are based on controversial production-sharing
agreements signed with the Kurdistan regional
government, under which the private companies get
between 10%-20% of the profit. The rest goes into
government hands.
Such production-sharing agreements are anathema to
much of Iraq's oil establishment, as well as to the
country's oil unions. The unions, which are
strongest in the southern oilfields around Basra,
have also rounded on the Iraqi oil minister, Hussein
Shahristani, threatening to disrupt production and
exports if foreign oil companies are granted too
much access to Iraqi oil. In response, Mr
Shahristani has ordered his ministry's agencies and
departments not to deal with the unions.
Loss of power
Meanwhile, many Sunni Arabs, who grew accustomed to
controlling Iraq's natural resources, oppose a
decentralised oil sector, fearing it will entrench
their loss of power.
The prospect of the Kurds going it alone on oil has
raised concerns among neighbouring countries, some
of which view the move as an attempt to establish an
economic platform for future independence. Kurdish
officials dismiss such claims as nonsense and stress
they want cooperation with Baghdad and their
regional neighbours, not confrontation. "It will be
very difficult for the Kurds, who have little oil
experience, to produce and export in the face of
opposition from Baghdad and the region," said a
western diplomat in Iraq. "Baghdad controls the
existing pipeline infrastructure, and neighbouring
Turkey is where Kurdistan's oil would be pumped."
However, he said: "It will be very difficult and
probably unwise for the oil minister to try to undo
the Kurds' achievements on the ground."
In June, Kurdish leaders struck a deal with Baghdad,
under which all oil revenues would go into a
separate fund before being allocated automatically
to the federal government and the regions. The KRG
would get 17%. But Kurdish officials complain that
the revenue-sharing draft has since been unpicked by
"chauvinists" in Baghdad. "One way or the other, the
government in Baghdad really wants to see a
resumption of a centrally controlled system," said
Mr Farren-Price. "But the Kurds are saying the
constitution specifically makes it clear that
regions should be responsible for bringing in
investment and developing new fields."
guardian co.uk
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