Kurdistan Gushing Crude Spawning Conflict

Kurdistan Gushing Crude Spawning Conflict

2007 September -   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 Kurdish 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 Dohuk 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." 

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