Tide Turns As Kurds
Push For Oil Law Amid South’s Sudden Bright Future
While the Iraqi government has made overtures to its Kurdish
counterpart in the north to end an oil standoff, much remains in doubt without
an actual law keeping the industry in check - rules which this time the Kurds
are pressing for rather than
Baghdad.
For a long time, the northern Kurdistan region was seen as the most attractive
oil market in the country but the latest bid rounds in December and subsequent
contract signings in the south have made it suddenly “less clear that Baghdad
actually needs an oil law with Kurdistan, because they’re actually doing pretty
well on their own,” said David Bender, an analyst in the Middle East practice
of the Eurasia Group’s Washington office.
Iraq’s government initially pushed for petroleum-sector legislation, but lately
the Kurdistan Regional Government (KRG) has been motivated to act “so they
don’t get sort of left behind, with this new international oil interest in
Iraq,” Bender argued.
Thirty-eight companies from 17 countries have exploration and production
contracts in the
Kurdistan region, according to
Ashti Hawrami, the KRG’s national resources minister. Several medium and large
discoveries have been made, while one private sector refinery has been built
and another is almost finished, Hawrami noted in a Feb. 4 government press
release.
Baghdad has never
viewed oil contracts signed independently by the Kurds as legitimate and
blacklisted companies involved in the northern region’s oil fields from working
in the south. Oil exports from the Kurdish area stopped last year when
companies were not reimbursed.
In recent days, however, the government of Prime Minister Nouri al-Maliki has
been considering covering the development costs of foreign firms working in the
north, according to media reports, which also cite that oil exports would flow
again soon from the north’s Tawke field, operated by Norway’s DNO and Turkey's
Genel Energy.
The central government’s ban on companies operating in the Kurdish area will
probably remain until the implementation of an oil law, which outlines the
sharing of profits, the signing of contracts and the role of
Iraq’s
National Oil Company, Bender told OilPrice.com. He added the Kurds will
presumably want to continue to forge contracts without
Baghdad’s
involvement.
As of now, only small interests have been doing business with the KRG, “but if
the Kurds ever want to attract major oil companies, they will have to come to
some understanding with the Iraqi government,” added Bender.
Baghdad’s interest these days in reaching out to
Irbil,
capital of the Kurdish north, is “more politically based rather than anything
having to do with oil,” he maintained. With March 7 parliamentary elections
looming, the Kurds may be the “king maker in whatever the next government is,
and one of their prices is probably going to be some sort of progress on an
oil law,” he argued. He said eventually an oil bill will be passed but conceded
it is “somewhat worrisome that there is no time table.”
Without clearly defined rules in the petroleum sector, heightened international
participation in the Middle Eastern country’s oil market has forced dealing
with certain issues through a budgetary process, Bender said. This year’s
budget spells out that provinces will be paid $1 per barrel for oil or gas they
produce, while the provinces, namely the Kurdish north, have to agree to export
oil or face a fine, he continued.
The whole country’s proven oil reserves were last estimated at 115 billion
barrels, and analysts have speculated
Iraq
will boast some six million to 10 million barrels a day over the next several
years.
While different stakeholders argue over spreading around the oil wealth, some
doubt the optimism of these predictions.
Robert Ebel, a senior adviser in the energy and national security program at
the Center for Strategic and International Studies, a Washington-based think
tank, told OilPrice.com he has heard Iraqis boast that more oil will flow from
their country than from
Saudi
Arabia.
“I take all that with a huge grain of salt because I don’t think it’s doable,”
Ebel said, adding he has a “huge doubt” about how quickly
Iraq
can produce oil, sell it abroad and bring back money into the country. Responding
to all of these contracts will take time, as well as a “tremendous amount of
equipment” and personnel, he added.
And the key, Ebel said, is the fate of all that money. “Is it spent properly,
or is it lost to the corruption and the variety of projects that don’t really
have that much importance to the economy?”
While the petroleum law remains paramount, the dispute over the
Kirkuk
region is also a major stumbling block that may cause problems for the nascent
oil industry.
Kirkuk
finds itself front and center in the fight between Iraqis and Kurds over
certain disputed territories.
“In the case of the Kurds,
Kirkuk
remains an extremely volatile situation. Right now, the
U.S.
is sort of forcing Kurdish and Arab security forces to cooperate and even that
is highly controversial,” Bender added.
U.S.
forces are set to depart next year. Whether such strategic cooperation between
local militaries will continue is a lingering question, he warned, and “whether
the security forces will start fighting is certainly a possibility.”
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This article was written by Fawzia Sheikh for
OilPrice.com who focus on Fossil Fuels, Metals, Crude Oil Prices, Alternative Energy and Geopolitics. To find
out more visit their website at: http://www.oilprice.com.
