|
Will oil companies provide Iraq's
Kurdistan its de facto statehood?
2.8.2012
By Steve LeVine - Foreign Policy |
|
|
|
August 2, 2012
Less than a year after the departure of U.S. troops
from Iraq, Baghdad is losing a primary lever over
independent-minded Kurdistan -- its grip on the
northern region's revenue-earning oil industry.
Kurdistan's secret weapon? Foreign oil companies are
exasperated with Baghdad's stinginess and allured by
the Kurds' more liberal terms for oil contracts.
These companies are becoming an unintentional fifth
column in Kurdistan's march toward economic
autonomy. On July 31, France's Total became the
third big oil company to break with Baghdad by
signing an unsanctioned oil deal with Kurdistan.
Baghdad, intent on full mastery over the nation's
massive petroleum revenue, forbids oil companies
from dealing directly with Kurdistan and instead
requires them to bid for projects through the
Ministry of Oil and to ship their oil through
Baghdad-controlled pipelines. However, ExxonMobil,
Chevron, and Total have now flouted Baghdad's
wishes, putting their oil deals in Iraq's south at
risk in the process. Their calculus is that despite
the relative inferiority of Kurdistan's oil
reserves, the potential upside there outweighs the
downside threat of possibly losing access to Iraq
proper, according to oil company executives with
whom I have spoken.
The pressure will now be on Baghdad to somehow stem
what is looking like an oil-company rebellion. It's
yet another challenge for the Iraqi government,
which is already struggling with rising violence and
dropping oil revenue because of sagging global
prices.
History has seen numerous states taken over by
companies -- one thinks, for instance, of the United
Fruit Company's activities in Latin America. But
should this trend continue in Kurdistan, it would
mark, as far as I recall, the first time that oil
companies have been principal actors in a nation
becoming effectively autonomous. Of course, it will
be up to the Kurdistan Regional Government (KRG) to
ensure that it is not swallowed up by the companies,
which was the fate of some Central and South
American countries in the 19th and early 20th
centuries.
On the surface, the companies' decision to spurn
Baghdad seems foolish. Iraq is a huge prize in the
oil business, with some 148 billion barrels of
proven oil reserves -- the second-largest
conventional volume in the world. By comparison, the
KRG claims to have another 45 billion barrels of oil
under its own soil.
After Saddam Hussein's overthrow in 2003, oil
companies from around the world rushed in for the
right to both rework old, debilitated fields, and to
drill new ones. But Baghdad has exacted tight-fisted
terms, signing only low-paying service contracts
that effectively turn high-risk, high-return
wildcatters into mere hired hands. Until recently,
the world's oil companies have bristled at the
terms, but gone along in hopes of conventional
production sharing agreements down the road. Now,
the grumbling in the ranks is growing to a roar.
A fourth-round auction of oil properties in May
showed both that Baghdad seems to have no intention
of greater generosity -- and also that the companies
are fed up. Just three of 12 blocks on offer found
successful takers.
In October, ordinarily ultraconservative Exxon
uncharacteristically signaled the first sign of
upheaval by signing an exploration deal with
Kurdistan despite having an agreement to produce oil
at Iraq's West Qurna field. That seemed quite a
gamble: West Qurna, after all, holds some 8.7
billion barrels of oil, and there was a distinct
possibility that Baghdad would revoke the deal as
punishment for Exxon's opening to the Kurds. Now,
Total's decision -- the purchase of a 35 percent
stake in two exploration blocks in Kurdistan --
makes what had been a gingerly tip-toeing toward the
KRG look more like a headlong rush. Total did not
respond to an email requesting comment.
Punishment has been meted out for the companies'
defiance: Exxon was barred from the latest auction,
and Chevron, which has no current deal in the south,
has been officially blacklisted from any future
contracts. However, the companies don't seem fazed
in the least.
"We understand completely that if we enter into a
contract in the north, we're probably going to be
blackballed in the south," an official from one of
the companies told me on condition of anonymity. "So
the question is, 'Have we exhausted all our options
for getting a deal in the south on terms that we
would find acceptable?'"
The answer for companies headed for the door is yes,
the official said. "I think that's beginning to be
borne out as a lot of companies are looking to
renegotiate their terms," he told me.
"The terms in the north are much better. The
government gets a stake, but the better you do, the
more you get, and the terms are attractive," he
said. Plus the overall conditions are "night and day
better" in Kurdistan than in Baghdad, he said. "You
fly into a very modern, efficient airport. There are
good hotels, good infrastructure."
When combined with the Kurdish authorities'
already-existing plans to build independent oil and
natural gas export pipelines out of Kurdistan that
avoid the Arab regions of Iraq entirely,www.ekurd.net
the oil deals look increasingly like a robust,
commercial-led carving out of the region as a
stand-alone entity. Some might call it another
substantial piece of the puzzle toward the creation
of the Kurds' longstanding national dream -- a state
of their own.
Robin Mills, a former Shell geologist and author of
The Myth of the Oil Crisis who does private
consulting on Iraq, said in a Twitter exchange that
the Total news is a "big blow" for Baghdad. As for
Total itself, the company seemed to be taking on
sub-par fields in Kurdistan -- "not a crown jewel in
return for risk they're taking with Baghdad" -- but
that "perhaps Total just doesn't see any risk with
Baghdad any more."
Can the embattled Iraqi central government get the
rebellious oil companies back in line? Patrick
Osgood, deputy editor of Oil & Gas Middle East
magazine, suggested in a tweet that Baghdad could
respond by making "a quick fire sale [of Total's
fields] to Petrochina," the publicly traded arm of
the state-controlled China National Petroleum
Company. But even that may not solve Baghdad's basic
problem: "Can't see it's smart for Baghdad to be so
reliant on Shell, BP, Russians & Chinese," Mills
said.
Some messages that run counter to conventional
wisdom stand out from this showdown: Oil companies,
it turns out, will not pay any price for access to
the biggest fields in the world, but in fact will
seek greener pastures. Oil cannot be bottled up --
it will find its market. And sometimes, a new state
can take form without a shot fired or a single
protester in the street.
Steve LeVine is a contributing editor at Foreign
Policy, a Schwartz Fellow at the New America
Foundation, and author of The Oil and the Glory, a
history of oil told through the 1990s-2000s oil rush
on the Caspian Sea. He is also an adjunct professor
at the Georgetown University School of Foreign
Service, where he teaches energy and security in the
Security Studies Program.
Copyright ©, respective
author or news agency,
oilandglory.foreignpolicy.com
Top |
Kurd Net
does not take credit for and is not responsible for the
content of news information on this page
|
®
