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Kurdistan's Gushing Crude Spawns Conflict.
Oil and Corruption in Iraq
12.9.2007
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September
12, 2007
Kirkuk, Iraq's border with Kurdistan region,
-- The German seismologist working in northern Iraq
was not supposed to talk about his job. But after
having spent nearly three months in an isolated camp
near the Taq Taq oilfields, he could not contain
himself.
"You can dig where you want," he said. "The crude
gushes!"
For more than two years, foreign companies have been
hunting - and finding - oil in the semi-autonomous
Kurdistan region.
They may not have discovered giant fields like the
famous Baba Gurgur near Kirkuk, but the oil
companies and their Kurdish clients are very
pleased.
Iraq has 115 billion barrels of proven oil reserves,
but its actual oil wealth is believed to be
significantly higher. Iraqi
Kurdistan and the oil-rich region of Kirkuk are
prime territories for speculators because of their
large proven and potential reserves.
The three northern provinces of Iraqi Kurdistan are
also the safest region in Iraq, an additional draw
for drillers and investors. The Kurdistan Regional
Government, KRG, has pushed ahead with exploration
in the north by signing contracts for oil
exploration with foreign companies.
That has irked oil officials in central government
in Baghdad, however, and the KRG's windfall is far
from secure. It is threatened by uncertainty
surrounding a new national law on Iraq's oil
reserves; by Turkish concerns over Kurdish strength;
and by pressure from rival ethnic groups whose
territories are not so blessed with natural
resources.
In early 2006, the first foreign oil company began
producing new oil out of Kurdistan. The Norwegian
wildcatter Det Norske Oljeselskap, DNO, sealed two
production-sharing agreements with the regional
government in 2004, gaining a 55 percent stake in
both licenses. DNO will take 10 to 30 percent of the
profits; the rest will go to the region.
At first, DNO estimated that the Tawke field near
the city of Duhok held 100 million barrels and would
reach peak production of 50,000 barrels a day next
year. Now, it appears that the field may contain
much more.
DNO's most recent operation in Tawke has a flow rate
of 12,000 barrels a day, 40 percent more than
another well in the same area.
DNO has 80 trucks moving as much as 10,000 barrels a
day from the site. The flow rate may reach 20,000 to
25,000 barrels per day, but transporting this amount
of crude by road could be logistically difficult and
expensive.
A second lot of drilling began in May 2006 in the
Taq Taq region, south of Sulaimaniyah, and was led
by Taq Taq Operating Company, also known as TTopco,
and Addax Petroleum, a Swiss-Canadian company.
TTopco, a joint venture with Genel Enerji of Turkey,
is currently drilling its fourth oil well and hopes
to drill two more by end of 2007.
The three oil wells that TTopco has already drilled
are expected to produce 75,000 barrels a day, said
Kemal Afaraci, an official with TTopco. Oil reserves
in Taq Taq are estimated at 1.2 billion barrels.
Firms such as Canada's Western Oil Sands and
Heritage Oil Corp as well as the UK's Sterling
Energy are also exploring the region.
Kurdistan wants to produce 200,000 barrels a day of
oil by the end of next year, and increase that to
one million barrels per day within five years.
Although northern Iraq's oil reserves are not as
large as the giant southern fields round Basra, the
local KRG Natural Resources Minister Ashti Hawrami
has said the area has "good potential", estimating
reserves around 25 billion barrels of oil and 100
trillion cubic feet of natural gas.
He also held out the prospect of a second export
pipeline from Kirkuk to the Turkish port of Ceyhan,
which would run through Kurdish-controlled
territory, thus giving it greater protection from
the sabotage attacks that plague pipelines elsewhere
in the country.
Kirkuk alone has 10 billion proven barrels, and
Hawrami has estimated that 20 billion barrels are
lying in other disputed areas in the north.
Based on these estimates, if the Kurds control the
north - including parts of Nineweh province, where
the KRG already has a strong political and security
presence, their potential reserves would be about 55
billion barrels, or almost half of Iraq's known oil
reserves.
That would mean Iraq's Kurds would have more oil
than Nigeria, Africa's biggest oil producer.
Not everyone is thrilled by this prospect.
A referendum will decide whether Kirkuk and other
disputed areas should be governed by the KRG or the
central government. But political disputes between
Kurdish and Arab leaders over when to hold the poll
could delay the vote until 2008 or later.
Turkey, too, is opposed to Iraqi Kurds gaining
Kirkuk because it fears that a too-strong Kurdish
region might encourage its own Kurdish citizens to
demand political rights. Angering Turkey could
weaken a pillar of the Kurds' oil strategy by
denying the landlocked region an outlet for exports.
"Iraqi Kurds would have nothing if they cannot
export their oil," said Soner Cagaptay, director of
the Turkish Research Program at the Washington
Institute for Near East Policy.
And there is a bigger obstacle which concerns all of
Kurdistan's oil exploration - a new oil law that
should determine who controls the oil fields and how
the revenues are shared.
The Kurds are insisting that regional authorities
such as the KRG have the right to manage oil
projects and draw up contracts, which has been a
point of contention with some Iraqi officials.
In early July, Prime Minister Nuri al-Maliki said
his cabinet had approved the oil bill and was
sending it to the legislature. At a news conference,
Maliki described it as the most important piece of
legislation in Iraq.
But only days later, despite assurances from Maliki
that the bill would soon be debated in parliament,
Kurdish leaders, all Sunni factions and the 30 MPs
allied to radical Shia cleric Muqtada al-Sadr spoke
out against it.
Although Kurdish leaders serve in Maliki's cabinet,
the KRG said it had not even seen the latest draft
and did not support it.
"We hope that the cabinet is not approving a text
with which the KRG disagrees, because this would
violate the constitutional rights of the Kurdistan
region," said the KRG statement.
The key issue for the Kurds concerns the control and
management of so-called future oil fields.
Although Article 108 of the Iraqi constitution says
that "oil and gas are the property of all the people
of Iraq" and are to be managed by the federal
government in conjunction with regional
governorates, only current oil fields, which are
controlled by the central government, are mentioned,
not those that might be discovered in the future.
Many arguments over the law are related to the 2005
constitution, which was written in vague terms in
order to garner broad support.
The KRG has made it clear that it wants to negotiate
its own contracts and opposes annexes contained in
the present bill that give control of 93 percent of
the oilfields to a new state-owned entity, the Iraq
National Oil Company, which will be created if the
law is passed.
The controversial oil bill is now on hold because
parliament recessed for August.
KRG Natural Resources Minister Hawrami has
maintained over the past several months that the
Kurdish administration would move ahead with its own
oil law and would not wait for Baghdad to pass
national legislation.
The Kurdish regional parliament did just that in
early August, when it passed its own law to regulate
oil management in the northern region.
KRG Premier Nechirvan Barzani said in a statement
that the passage of this legislation was "a historic
moment that will be remembered for years to come."
The law creates a regional oil company to operate
the fields in Iraqi Kurdistan and insists that the
KRG should have a joint role, with the Iraq National
Oil Company, in managing current oil fields in the
Kurdish provinces. It demanded that the Iraqi
central government doe not authorize operations in
disputed areas such as Kirkuk until the referendum
decides who is to govern them.
The Iraqi constitution calls for the country's oil
revenues to be distributed equally, and the KRG law
says that oil revenues will be sent to the central
government. But it gives more regional control than
some Iraqi officials would like local governments to
have.
In a statement following the KRG's approval of its
regional oil law, the Association of Muslim Scholars
in Iraq, a leading Sunni Arab group, said in a
statement that Kurdish politicians "are not the
official representatives of the Iraqis or the
Kurds."
The association also warned foreign companies not to
work with the "so-called Kurdish government."
Most Sunni Arab-dominated regions in Iraq are not
believed to have oil, and Sunni leaders support
strong federal control over oil revenue and
management.
The Kurds believe differently.
In a statement, Hawrami noted that "under the
constitution of Iraq, oil and gas management is
primarily a regional right, and our success depends
upon us exercising that right. This law of the
Kurdistan Region is the embodiment of that right."
There are also problems between the central
government and the Kurdish authorities over current
contracts. In March 2007, Iraqi Oil Minister Husayn
al-Shahristani indicated that the agreement with DNO
may not be valid because it has not been approved by
the central government.
"All the contracts that have been signed either by
the previous regime or by the northern region will
have to satisfy the conditions of the new law,"
Shahristani said at an OPEC meeting in Vienna.
In May, Shahristani said at a conference in Saudi
Arabia that any contracts signed by the Kurds before
the federal oil law was passed would be considered
invalid and illegal, reported news agencies.
Barzani insisted the contracts were legal, and
issued a statement suggesting that his government
may secede if the contracts were rejected.
"If Baghdad ministers refuse to abide by that
constitution, the people of Kurdistan reserve the
right to reconsider our choice," he said.
Other points of contention for Sunni and Shia
leaders include how oil profits are distributed and
foreign involvement in Iraqi oil policies and
contracts. The Iraqi oil bill is vague on these
issues.
But time is short. The White House is increasingly
desperate for signs of political progress now that
the United States military commander in Iraq,
General David Petraeus, and Ambassador Ryan Crocker
reported to Congress Monday on the progress made
since more U.S. troops were sent in February.
Congress and the American public are increasingly
likely to put pressure on the Bush administration to
pull the 162,000 U.S. troops out of Iraq.
The problems of the oil bill bode ill for the other
“benchmarks” that the Bush administration has been
pressuring Maliki's government to meet.
These include provincial elections, reversing a
decision by the U.S. led Coalition Provisional
Authority to ban former Baath party members from
holding government and military positions, and
revising Iraq's constitution.
But Iraqi lawmakers show little signs of bending to
accommodate Bush on an issue as crucial as oil.
"We have two clocks - the Baghdad clock and the
Washington clock - and this is a perfect example,"
said Mahmoud Othman, a prominent moderate Kurdish MP
in Baghdad. "This has always been the case.
Washington has been pushing the Iraqis to do things
to fit its agenda."
ens-newswire.com
* Kirkuk city is a Kurdistani city and it lies just
south border of the Kurdistan autonomous region and
it is not under the full control of Kurdistan
Regional Government administration, its population
is a mix of majority Kurds and minority of Arabs,
Turkmen.
The former Iraqi president Saddam Hussein forced
over 250,000 Kurdish residents to give up their
homes to Arabs in the 1970s, to "Arabize" the city
and the region's oil industry.
Based on Iraq's Constitution a referendum is to be
held in late 2007 to decide whether the oil-rich
Kurdish province should be annexed to the safe
semiautonomous Kurdistan region in Iraq's north.
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