Kurdish Authorities Confident About Region's Oil Sector

ERBIL, Iraqi Kurdistan – Over the past several years, the right to manage oil and gas deals has been a major dispute between Baghdad and the semi-autonomous Kurdistan Region which aspires to become a major global energy source with its massive oil and gas fields.

Because Iraqi officials and political observers believe oil and gas development in Iraqi Kurdistan may in the end prompt a demand for an independent state, Baghdad's reservations about Kurdistan's oil industry has political dimensions. This became clear when ExxonMobil, the world's largest oil company, signed a contract with the Kurdistan Region.

Kurdistan Region President Masoud Barzani said during a recent visit to Duhok province, "I have not met with any oil companies before, except Exxon Mobil and that is because I know the importance of its investment in the Kurdistan Region. Therefore I support them to come and invest in the fields of gas and oil in Kurdistan Region."

"The Kurdistan Region's contract with Exxon Mobil is a sound contract and doesn't have problems," said Ashti Hawrami, Kurdistan Regional Government (KRG) Minister of Natural Resources.

Hawrami said that the Kurdistan Region has decided to sign more contracts with other international oil and gas companies in the near future.

In September 2011, an oil and gas conference was held in Kurdistan where Hawrami announced that "There is a mutual understanding between Baghdad and KRG to draft a new oil and gas law."

Hawrami said he will meet with the Iraqi minister of oil to discuss the new draft law.

Kurdish officials backed an oil and gas law that was drafted in Baghdad 2007, but the Iraqi government is now planning to pass a new law that has put Kurdistan authorities at unease.

"The KRG has sent its concerns and comments regarding this draft to the Iraqi Ministry of Oil, Prime Minister Nuri Maliki and the Iraqi Councils of Ministers," a senior official at KRG Ministry of Natural Resources said, speaking on condition of anonymity. "The case is now in the hands of the Iraqi Parliament and the central government,"

However, Farhad Atrushi, spokesman for the Kurdistani Alliance in the Iraqi Parliament, believes that due to the current political turmoil in Baghdad, the new oil and gas law may not be passed any time soon.

"The minister of oil cannot make any moves without Shahristani, and Shahristani cannot make any decisions without Maliki," Atrushi said in reference to Hussein Shahristani, the deputy prime minister for energy affairs. "This matter has been turned into a political issue and it is very difficult to solve."

Shahristani, Iraq's most influential oil official, has consistently opposed Kurdistan's oil deals with foreign companies and described them as illegal. However, international oil companies continue to seek investment in the relatively stable Kurdistan Region.

"If these international companies weren't 100 percent sure of the security and constitutional aspects of regions they invest in, they would not have come in the first place," Atrushi said. "The Kurdistan Region has its own oil and gas laws, and it is safe from the security aspect. The policies of the KRG and its diplomacy have encouraged many international companies to come to Kurdistan Region and sign contracts with the KRG Ministry of Natural Resources."

The senior official from the ministry of natural resources said oil companies are hoping to invest in Kurdistan because of its investment law and "the prospect of high levels of oil and gas production in Kurdistan region."

Currently key industry players such as Marathon, HESS, Repsol and ExxonMobil are involved in Kurdistan's oil sector.

KRG's contract with ExxonMobil allows the oil giant to explore six oil fields, the biggest deal of its kind so far in Kurdistan.

According to the Ministry of Natural Resources, there are more than 45 billion barrels of reserve oil in the Kurdistan Region. The KRG has signed 45 contracts with oil companies from 17 different countries.

The Kurdish Parliament passed its own oil and gas law in 2007 which further deepened the disputes with Baghdad. Kurdish authorities argued that the Iraqi constitution entitles them to unilaterally sign contracts with foreign companies while there is no federal oil and gas law, a move that Baghdad maintains is illegal.

In a recent interview, Barzani's Chief of Staff Fuad Hussein told Rudaw, "Some Iraqi officials and some in the US as well tried to have the agreement revoked and pressured ExxonMobil for that reason. Our talks with the State Department and ExxonMobil's officials convinced everyone that the deal was legal and constitutional and that it would be in the interest of Iraq and the Kurdistan Region."

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