"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 Irbil. "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 Sulaimaniya, 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 Dohuk, 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 Kurdish parliament in Irbil 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."
Via: The Guardian
by Michael Howard