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Revue de Presse-Press Review-Berhevoka ęape-Rivista Stampa-Dentro de la Prensa-Basin ózełi

FINANCIAL TIMES AUGUST 14/AUGUST15 2004

Disputed oil contracts put Kurdish autonomy to the test

Officials in Baghdad claim a series of promising drilling deals struck by Kurds in lraq's north are invalid. Turkey and Iran are following developments with interest, reports Nicolas Pelham

A worfcer in northem lraq, which is attracting oil men’s attention AFP

Until recently, just about the only visitors to the Tactac depression in Iraqi Kurdi-stan were monogamous men heading to the local spring, whose waters were reputed to have the power to grant second wives.

Now oil men in four-wheel-drive vehieles are racing over its stony grazing grounds, conducting seismic survey$. A Turkish company, General Energy, bas brought in 70 workers, including 10 Turks, to drill wells, striking oil in all three.

“The potential of the field looks good," says Mehmet Sepii, the company’s chair-man, who says he obtained drilling rights in the 350 sq km concession in a production-sharing deal with the Kurdish regional govern-ment, based in Suleimaniya, three months before the war. “1 think in northem Iraq there are very good fields, but there is not yet enough production."

The prospect is exciting

the Kurds, hopeful at lak of acquiring their own source of oil wealth and reducing their dependence on Baghdad. In addition to the Tactac field, 20 miles north-east of Kirkuk, Suleimaniya has signed a similar deal with a second Turkish company, Petoil, to drill at Chya Surkh, on the Iranian border, and entered into negotiations with an Australian compąny survey-.

ing gas fields in Chan* chamal.

These contracts have sparked a dispute with the central govemment in Baghdad, however, which claims the exclusive right to sigm oil deals. Baghdad’s oil min-istry says the contracts signed with the Kurdish gov-emment are invalid.

“It is illegal for any party to conduct negotiations with any party outside the Minis-try of Oil. We don’t recog-riise them,” says Ameer Abdillilah, a senior oil minis-try official. “We choose the companies.”

Companies fouhd negotia-ting with Kurdish leaders, he wams, will be barred from bidding for the greater prize of projects elsewhere in Iraq, the first three of which the ministry expects to award this month. The dispute over control of min-erals is a big test of the Kurdish region’s futurę within a united Iraq, say industry analysts. Turkey and Iran, which have restive Kurdish minorities of their own, are anxiously ,waiting to see who wins in the battle between the centre and the provinces.

“It plays into the broader Kurdish efforts to have as much independence as possible. Kurds will try to create a fait accompli and this is their moment,” says an industry analyst familiar with the negotiations.

In the midst of the intrigue, Suleimaniya’s hotels buzz with oil consul* tants who, free of the security constraints of Baghdad, are seeking to advance negotiations and hobnob with officials from the Patriotic Union of Kurdistan, Suleima-niya’s ruling party.

The Suleimaniya-based government only Controls the eastem half of Kurdistan - territory under the control of the PUK. Their sometimes-rival, the Kurdistan Democratic party. Controls the west, and has a sep-arate government based in Arbil. Not to be outdone,

Arbil also opened its doors to prospectors. On June 29, a day after the US ended its formal occupation of Iraq, a smali Norwegian oil company, DNO ASA. said it had signed an oil agreement with the Kurdistan regional gov-emment “to explore for and develop oil and gas in Northern Iraq”.

Barham Saleh, Iraq's Kurdish deputy prime minister, is the man with the

uncomlortable job of bridg-ing the divide between the central govemment and the Kurdish regional govern-ments. Before his appoint-ment, he was prime minister of the Kurdistan regional govemment based in Suleimaniya. He signed deals with both Turkish companies and led negotiations with the Australian firm, Global Petroleum Ltd, in November last year.

He now chairs the Supremę Committee on Oil, which determines the oil ministry’s policy. While “the federal govemment needs to ratify any agreement to be legally binding”, he says, regional governorates must be consulted on Baghdad’s plans and have the right to conduct negotiations. Mr Saleh’s position appears to contradict flatly that of oil minister Thamir Ghadbhan, who told the Financial Times last month he would establish a single national oil company covering all of Iraq.

The two camps claim legit-imacy for their positions in Iraq’s interim constitution, the Transitional Administra-tive Law. Article 25 reads: “The Iraqi Transitional Government shall have exclusive competence in managing the natural resources of Iraq.” But it also stipulates that decisions should be taken “in consul-tation with the govemments of the regions and the

administrations of the gover-norates”.

The oil ministry shows no sign of bowing to the Kurdish position. One of its three tenders is for the $100m (€81m, £54m) development of the Khormala field, the northem-most Fmger of the giant Kirkuk field, which juts into the Kurdish-con-trolled region.

It remains unclear how far Kurdish leaders wish to push the issue. Tactac has ceased production, says Busheyr Noori, its operations manager. Global Petroleum says it is also seeking Baghdad’s approval before proceeding.

Underlying Baghdad’s position, says Minę Cevik, editor of the Turkish Daily News, is the fear that if the Kurds go their own way, a futurę regional govemment in the southem oil produc-ing zonę might follow suit. “Then the Shia too will say why don’t we operate our own oil fields in the south,” he says.