Iraq vows to work with BP on controversial oil field

AFP

Last updated: November 6, 2013
Iraq vows to work with BP on controversial oil field

Iraq said Wednesday it would proceed with work alongside British energy giant BP on a controversial northern oilfield, in a move likely to spark anger in the country's Kurdish region.

The development of the Kirkuk oilfield, which lies amid a swathe of disputed territory in north Iraq, is at the heart of a row over land, oil revenues and the powers of the central government that has been raging for years between Baghdad and the autonomous Kurdistan region.


Iraqi Oil Minister Abdelkarim al-Luaybi, Kirkuk provincial Governor Najm al-Din Omar Karim and BP chief executive Bob Dudley visited the field after holding talks in the province's eponymous capital.


"The contract with the British company will be executed by treating the decline in oil production at Kirkuk oilfield, which has reached 230,000 barrels (per day), and the company will work on surveying the fields and sites of Kirkuk oilfield throughout the contract period," Luaybi told AFP.

Iraq official fears split as Kurdistan-Turkey oil trade grows

March 30, 2013 – REUTERS – LONDON : Rising oil trade between Iraqi Kurdistan and Turkey threatens to split Iraq in two, a senior Iraqi official said, as the autonomous Kurdistan region ignores Baghdad’s threats of tough action against what it terms illegal exports.


Oil lies at the heart of a long-running feud between the central government and the autonomous Kurdistan region. Baghdad says it alone has the authority to control exports and sign contracts, while the Kurds say their right to do so is enshrined in Iraq’s federal constitution.

“If oil from Kurdistan goes through Turkey directly, that will be like dividing Iraq. This is our big concern,” Iraq’s Deputy National Security Adviser Safa al-Sheikh Hussein said on the sidelines of an Iraq conference.

The Kurdistan Regional Government (KRG) started on the path towards economic independence early this year by exporting small volumes of crude oil by truck to Turkey. The move further angered Baghdad, which threatened action against the region and foreign oil companies working there to stop the exports, which it says are illegal. KRG crude used to be shipped to world markets through a Baghdad-controlled pipeline running from Kirkuk to the Turkish port of Ceyhan, but exports via that channel dried up in December due to a payment row with Baghdad. The northern region is now pushing ahead with plans to build its own oil export pipeline to Turkey, despite objections from the United States, which fears the project could lead to the break-up of Iraq. KRG Energy Minister Ashti Hawrami has said a gas pipeline now being laid can be converted to ship up to 300,000 barrels per day of crude by June.

“Kurdistan is almost independent and they want more gains now,” said Hussein, deputy of the National Security Council, created in 2004 as a forum for security decision-making. “They are a little over-confident and overly ambitious.”

TURKEY LINKS

For its part, energy-hungry Turkey has increasingly courted Iraqi Kurds as relations with the Shi’ite-led central government in Baghdad have soured and it now ranks as a major trading partner for the autonomous region.

A broad energy partnership between Turkey and Iraqi Kurdistan ranging from exploration to export has been in the works since last year. Though steadily developing more energy autonomy, the region still relies on the central government for a share of the national budget from oil revenues. “There’s a lot of tension with the Kurds,” said Hussein. “I don’t think it can be resolved this year, but maybe we can contain it.” Kurdistan’s exploration contracts with oil majors like Exxon Mobil and Chevron are a further source of friction that have prompted Baghdad repeatedly to warn companies they risk losing their assets in the south of the country.

Exxon has been weighing whether to sell out of the giant, southern West Qurna-1 oilfield, but industry sources say Iraq’s Prime Minister Nuri al-Maliki offered the company substantially improved terms in January to keep it at the $50 billion project.

Since then, Iraqi and Kurdish officials have both suggested Exxon will side with them.Hussein said that if Exxon were to start to drill in territories disputed with Kurdistan, “there will be a legal response … to end all (of Exxon’s) work in the rest of Iraq.”

“We are determined to resolve our problems peacefully, but this can influence the integrity of Iraq,” he said.

Officials from Exxon and Iraqi Kurdistan last month visited the Qara Hansher oil exploration block that lies in disputed territories where both regions claim jurisdiction and discussed building a camp there. And industry sources said the U.S. major has drilled three water wells at the al-Qush block, also in the disputed zone, in preparation to start drilling by early June. The oil dispute has been accompanied by an increase in military tension between the two regions.

“Neither side wants to end this militarily,” said Hussein, a former Brigadier General in Iraq’s Air Force.

Iraq asks Obama to halt Exxon’s Kurdish deal

BAGHDAD/LONDON (Reuters) – 20.6.2012 - Iraq has asked U.S. President Barack Obama to stop Exxon Mobil exploring for oil in its autonomous Kurdistan region, saying the U.S. company’s actions could have dire consequences for the country’s stability.



An aide to Iraqi Prime Minister Nuri al-Maliki told Reuters of a letter the premier had sent, seeking Obama’s intervention, as Kurdistan said on Tuesday it would sign more deals with majors to raise its output five-fold. Turkey also signaled it was prepared to import oil directly from Kurdistan, potentially defying Baghdad, which has a long-running dispute with Kurdistan over oil export controls. Exxon angered Baghdad last year by signing an exploration deal with the Kurdistan Regional Government (KRG) in the north, which the central government deemed illegal.





“Prime Minister Nuri al-Maliki explained to President Obama in the letter sent this month the dire consequences of the Exxon deal and its negative impact on Iraq’s stability,” Maliki’s media adviser Ali al-Moussawi said.



Since the last U.S. troops withdrew from Iraq in December, disputed areas between Kurdistan and Baghdad have been seen as a potential flashpoint for conflict as tensions between the two regions rise, without the buffer of a U.S. military presence.Iraq’s oil minister said in April that Exxon had written to Baghdad informing it that it had suspended work in the Kurdish region.



“Despite Exxon’s letters about the freezing of their work in the region, we still receive information that suspicious work is going on relating to their exploration activities,” Moussawi said.



“The point of the message was clear. The U.S. administration must intervene,” he added. Kurdistan announced in November the signing of a deal for six exploration blocs with Exxon, the first major oil company to deal directly with the Kurds in northern Iraq. Iraqi Kurdistan, which has its own government and armed forces, has already clashed with the central government over autonomy and oil rights, and halted its crude exports in April after accusing Baghdad of not making due payments.



On Tuesday, Kurdistan’s natural resources minister said it expects more oil majors to follow Exxon in the next few months and that oil shipments would resume.”The market is very buoyant in Kurdistan. We have a lot of majors circling around looking at new PSCs (production-sharing contracts) and certainly mergers and acquisitions,” Ashti Hawrami told an energy conference in London.

“So in the next few months, we expect to see another two or three major companies coming and working in Kurdistan.”


Exxon is one of the oil majors participating in massive projects in central Iraq, which is due to become the biggest source of additional oil for world markets in the next decade. But as exploration terms with the central government look less and less attractive, companies begin to look at Kurdistan. Exxon is keeping a low profile in Kurdistan but industry sources said the company had already issued a tender for drilling rigs while French rivals Total and Norway’s Statoil are also looking at exploration blocks there.



Exxon was not available on Tuesday to comment on Maliki’s letter. Total and Statoil have previously declined to discuss their plans in Kurdistan.



The KRG halted oil exports in April due to a payment dispute with Baghdad. Before then, contractors in Kurdistan were producing and exporting about 200,000 barrels per day (bpd).”The oil will flow … regardless of an agreement, and I infinitely prefer an agreement,” said Hawrami. By 2014 to 2015, output should grow to 1 million bpd, he said.


“When you have 1 million barrels a day stranded, it will find its way to the market despite the political haggling.” “We expect more discoveries this year to bring us to our new target of 2 million barrels per day by 2019.” Turkey signaled on Tuesday that was prepared to import oil directly from Kurdistan despite Baghdad’s stance that it has the sole right to exports.



“Turkey cannot stay indifferent to developments in the energy sector of Iraq, including those in the KRG,” Berris Ekinci, Deputy Director General for Energy, Water and Environment at Turkey’s ministry of foreign affairs, told the London conference. “The most important thing will be the market drivers,” she said in reference to Turkey’s potential purchases of Kurdish oil.Small scale deliveries are expected to commence in coming weeks, when Kurdistan starts up a crude-for-products swap with Turkey, she told Reuters.



Industry sources say the KRG is gearing up to move crude by tanker truck to Turkey – possibly as part of the arrangement. Kurdistan is short of key products, including diesel and kerosene. It receives only 15,000 bpd of fuel from southern Iraq.



“The volume (from Turkey) will increase incrementally,” said Ekinci. “But neither the start date nor the volume has been set yet.”Turkey, which shares a border with Kurdistan, has increasingly courted Iraqi Kurds as its relations with the Shi’ite-led central government in Baghdad have soured. Turkey is a major investment and trading partner for Iraq, especially for Kurdistan.



http://news.yahoo.com/iraq-asked-obama-intervene-exxon-kurd-deal-government-161111378–finance.html

Western Oil Firms Remain As US Exits Iraq

By Dahr Jamail


08 January, 2012

Al Jazeera

Iraq plans to increase its oil production capacity up to 12 million barrels per day by 2017 [Al Jazeera]

Baghdad, Iraq - While the US military has formally ended its occupation of Iraq, some of the largest western oil companies, ExxonMobil, BP and Shell, remain.

On November 27, 38 months after Royal Dutch Shell announced its pursuit of a massive gas deal in southern Iraq, the oil giant had its contract signed for a $17bn flared gas deal.

Three days later, the US-based energy firm Emerson submitted a bid for a contract to operate at Iraq's giant Zubair oil field, which reportedly holds some eight million barrels of oil.

Earlier this year, Emerson was awarded a contract to provide crude oil metering systems and other technology for a new oil terminal in Basra, currently under construction in the Persian Gulf, and the company is installing control systems in the power stations in Hilla and Kerbala.

Iraq's supergiant Rumaila oil field is already being developed by BP, and the other supergiant reserve, Majnoon oil field, is being developed by Royal Dutch Shell. Both fields are in southern Iraq.

According to the US Energy Information Administration (EIA), Iraq's oil reserves of 112 billion barrels ranks second in the world, only behind Saudi Arabia. The EIA also estimates that up to 90 per cent of the country remains unexplored, due to decades of US-led wars and economic sanctions.

"Prior to the 2003 invasion and occupation of Iraq, US and other western oil companies were all but completely shut out of Iraq's oil market," oil industry analyst Antonia Juhasz told Al Jazeera. "But thanks to the invasion and occupation, the companies are now back inside Iraq and producing oil there for the first time since being forced out of the country in 1973."

Juhasz, author of the books The Tyranny of Oil and The Bush Agenda, said that while US and other western oil companies have not yet received all they had hoped the US-led invasion of Iraq would bring them, "They've certainly done quite well for themselves, landing production contracts for some of the world's largest remaining oil fields under some of the world's most lucrative terms."

Dr Abdulhay Yahya Zalloum, an international oil consultant and economist who has spent nearly 50 years in the oil business in the US, Europe, Asia and the Middle East, agrees that western oil companies have "obtained concessions in Iraq's major [oil] fields", despite "there being a lack of transparency and clarity of vision regarding the legal issues".

Dr Zalloum added that he believes western oil companies have successfully acquired the lions' share of Iraq's oil, "but they gave a little piece of the cake for China and some of the other countries and companies to keep them silent".

In a speech at Fort Bragg in the wake of the US military withdrawal, US President Barack Obama said the US was leaving behind "a sovereign, stable and self-reliant Iraq, with a representative government that was elected by its people".

Of this prospect, Dr Zalloum was blunt.

"The last thing the US cares about in the Middle East is democracy. It is about oil, full stop."

A strong partnership?

A White House press release dated November 30 titled, "Joint Statement by the United States of America and the Republic of Iraq Higher Coordinating Committee", said this about "energy co-operation" between the two countries:

"The United States is committed to supporting the Republic of Iraq in its efforts to develop the energy sector. Together, we are exploring ways to help boost Iraq's oil production, including through better protection for critical infrastructure."

Iraq is one of the largest oil exporters to the US, and has plans to raise its overall crude oil exports to 3.3m barrels per day (bpd) next year, compared with their target of 3m bpd this year, according to Assim Jihad, spokesman for Iraq's ministry of oil.

Jihad told Al Jazeera that Iraq has a goal of raising its oil production capacity to 12m bpd by 2017, which would place it in the top echelon of global producers.

According to Jihad, Iraq's 2013 production goal is 4.5m bpd, and in 2014 it is 5m bpd. The 2017 goal is ambitious, given that Iraq did not meet its 2011 goal, and many officials say 8m bpd capacity is more realistic for 2017.

Unexplored regions of Iraq could yield an additional 100bn barrels, and Iraq's production costs are among the lowest in the world.

To date, only about 2,000 wells have been drilled in Iraq, compared with roughly one million wells in Texas alone.

Globally, current oil usage is approximately 88m bpd. By 2030, global petroleum demand will grow by 27m bpd, and many energy experts see Iraq as being a key player in meeting this demand.

It is widely understood that Iraq will require at least $200bn in physical and human investments to bring its production capacity up to 12m bpd, from its current production levels.

Juhasz explained that ExxonMobil, BP and Shell were among the oil companies that "played the most aggressive roles in lobbying their governments to ensure that the invasion would result in an Iraq open to foreign oil companies".

"They succeeded," she added. "They are all back in. BP and CNPC [China National Petroleum Corporation] finalised the first new oil contract issued by Baghdad for the largest oil field in the country, the 17 billion barrel super giant Rumaila field. ExxonMobil, with junior partner Royal Dutch Shell, won a bidding war against Russia's Lukoil (and junior partner ConocoPhillips) for the 8.7 billion barrel West Qurna Phase 1 project. Italy's Eni SpA, with California's Occidental Petroleum and the Korea Gas Corp, was awarded Iraq's Zubair oil field with estimated reserves of 4.4 billion barrels. Shell was the lead partner with Malaysia's Petroliam Nasional Bhd., or Petronas, winning a contract for the super-giant Majnoon field, one of the largest in the world, with estimated reserves of up to 25 billion."

Zalloum says there is a two-fold interest for the western oil companies.

"There is development of the existing fields, but also for the explored but not-yet-produced fields," he said. "For the old fields, there are two types of development. One is to renovate the infrastructure, since for most of the past 25 years it has depreciated due to the sanctions and turmoil. Also, some of these fields have different stratum, so once they use innovative techniques like horizontal drilling, there is a huge potential in the fields they have explored."

But there are complicating factors. As a spasm of violence wracked Baghdad in the wake of the US military withdrawal and political rifts widen, Iraq's instability is evident.

"Iraq has lots of cheap-to-get oil, but it also has a multitude of problems - political, ethnic, tribal, religious etc - that have prevented them from exploiting it as well or as quickly as the Saudis," says Tom Whipple, an energy scholar who was a CIA analyst for 30 years. "Someday it may turn out that Iraq has more oil underground than Saudi Arabia. The big question is how stable it will be after the US leaves? So far it is not looking all that good."

Jihad, Iraq's ministry of oil spokesman, however, said attacks against Iraq's oil pipelines have minimal effect on production capabilities, and claimed "sabotage will not affect our oil production and exports because we can fix these damages within days, or even hours".

Whipple, a fellow at the Post-Carbon Institute, says Baghdad had driven a hard bargain with western oil companies.

"The only reason they are participating is because everybody else is and they hope to get a foot in the door in case some new government in Iraq changes its policies to let other outsiders make more money. Remember it is not all the traditional western oil companies that are in there; the Chinese, Russians and Singapore all want a piece of the action."

Wrong idea?

Spokesman Jihad told Al Jazeera that the reason many Iraqis think western oil companies are operating in Iraq is simply to steal Iraq's oil.

"These ideas were obtained during the regime of deposed dictator Saddam Hussein, and these are the wrong ideas," he said. "The future will help Iraqis understand these companies have come to work here to help Iraq sell its oil to help the people, and they work to serve the country."

Jihad admitted that his media office works "to help Iraqis understand the nature of the work of these companies and their investing in Iraq".

Despite the efforts of Jihad's office to prove otherwise, Iraqis Al Jazeera spoke with disagree.

"Only a naïve child could believe the Americans came here for something besides our oil," Ahmed Ali, an unemployed engineer, told Al Jazeera. "Nor can we believe their being here has anything to do with helping the Iraqi people."

Basim al-Khalili, a restaurant owner in Baghdad's Karada district, agrees.

"If Iraq had no oil, would America have sacrificed thousands of its soldiers and hundreds of billions of dollars to come here?"

Oil analyst Juhasz also agrees.

"The US and other western oil companies and their governments had been lobbying for passage of a new national law in Iraq, the Iraq Oil Law, which would move Iraq from a nationalised to a largely privatised oil market using Production Sharing Agreements (PSAs), a type of contract model used in just approximately 12 per cent of the world's oil market."

She explained that this agreement has been summarily rejected by most countries, including all of Iraq's neighbours, "because it provides far more benefits to the foreign corporation than to the domestic government".

But it has not been an easy road for the western oil companies in Iraq.

"Major western companies, such as Chevron and ConocoPhillips, that had hoped to sign contracts were unable to do so. A third round [of contracts] took place in December 2010 and saw no major western oil companies (except Shell) win contracts. I believe that there was an Iraqi backlash against the awarding of contracts to the large western major oil companies. Thus, in December 2010, fields went to Russian oil companies Lukoil and Gazprom, Norway's Statoil, and the Angolan company Sonangol, among others."

Unlike under Iraq's Oil Law, these contracts do not need to go through parliament, according to the central government. This means the contracts are being signed without public discourse.

"The public is against privatisation, which is one reason why the law has not passed," added Juhasz. "The contracts are enacting a form of privatisation without public discourse and essentially at the butt of a gun - these contracts have all been awarded during a foreign military occupation with the largest contracts going to companies from the foreign occupiers' countries. It seems that democracy and equity are the two largest losers in this oil battle."

Iraq's oil future

Under the current circumstances, the possibility of a withdrawal of western oil companies from Iraq appears remote, and the Obama administration continues to pressure Baghdad to pass the Iraq Oil Law.

Nevertheless, resistance to the western presence continues.

"The bottom line is that it seems clear that the majority of Iraqis want their oil and its operations to remain in Iraqi hands," said Juhasz. "Thus far, it has required a massive foreign military invasion and occupation to grant the foreign oil companies the access they have thus far garnered."

While Iraq's security remains as volatile as ever, as does the political landscape - which can change dramatically at any moment - there is one thing we can always count on as being at the heart of these conflicts, and that is Iraq's oil.

Dahr Jamail is an American journalist who is best known as one of the few unembedded journalists to report extensively from Iraq during the 2003 Iraq invasion. He spent eight months in Iraq, between 2003 to 2005, and presented his stories on his website, entitled Dahr Jamail's MidEast Dispatches. Jamail writes for the Inter Press Service news agency, among other outlets. He has been a frequent guest on Democracy Now!. Jamail is the recipient of the 2008 The Martha Gellhorn Prize for JournalismFollow Dahr Jamail on Twitter: @DahrJamail

IRAQ: False Alarm on Oil Exports or Not? by Reidar Visser

Posted by Reidar Visser on Wednesday, 2 February 2011 13:57

The surprising aspect of the failure to start oil export from Kurdistan yesterday was not the fact that the target date of 1 February was missed. This happens in Iraqi politics all the time: Each day, for almost every issue of significance, one can find someone saying it will be solved “in two days”, others claiming it will take “two weeks” and some maintaining “the rest of the month” is needed. Rather, the remarkable thing was that the messenger in this case was someone who has a businesslike reputation and is seen as reasonably realistic by friends and opponents alike – the prime minister of the Kurdish Regional Government (KRG), Barham Salih.

It is still unclear whether the delay means the oil-export issue will simply become one among several items in the growing quagmire of pending questions in Iraqi politics or whether a solution is actually around the corner. The new government that was announced in late December 2010 remains incomplete without security ministers. The controversial, US-supported strategic policy council remains bogged down in detailed disputes about the status of its chairman/president (that technical distinction is part of the dispute!) and the country has no legally elected vice presidents (not that they are needed, but this issue keeps deflecting energy from potentially useful discussions). Before parliament can give the budget the full attention it requires, it needs to elect more committee heads and update its own bylaws, and with the recent outrage over Maliki’s moves to bring the “independent” commissions under closer control by the executive, there is more talk than ever about actually trying to craft the special legislation for the federal supreme court called for under the constitution (which requires a two-thirds majority in parliament).

The oil-export issue itself has some additional problematic aspects that have received a certain degree of attention already and are likely to cause more widespread discussion once the issue reaches the full parliament through the budget, regardless of whether oil is actually about to start flowing (and some media reports suggest this is indeed the case). Ever since the first oil-export attempt was aborted in 2009 and local sales of oil were initiated in Kurdistan by the local authorities in order to compensate the foreign companies working there, voices critical of these local sales have been heard in Baghdad. When Ashti Hawrami, the KRG natural resources minister, told The New York Times on 8 July 2010, at a time when the local sales of oil were peaking, that proceeds from oil smuggled to Iran were being used to compensate foreign companies operating in the region, it certainly added to the controversy (even through Hawrami later claimed journalists had failed to understand his distinction between oil and oil by-products). At any rate, going forward, it seems clear that a part of the proposed new deal on oil “exports” from Kurdistan actually involves not exports as such but rather boosting production for local markets, and if this relates to some kind of special quota for Kurdistan that will be exempted from the general, population-based national revenue-distribution formula and hence less transparent – and if local sales are done according to a different formula than export oil (i.e. if more money gets pocketed by the foreign companies) – then it could certainly prompt criticism from Iraqi parliamentarians who are likely to ask tough questions about any deviance from the constitutionally mandated, universal pattern of distribution across Iraq. Again, it is critical to note that as far as oil is concerned, there is not one iota of difference between a federal region and a governorate when it comes to the relevant constitutional provisions.

Meanwhile, the Kurds have made one important gain in that Khalid Shwani has reportedly been made head of the important legal committee in parliament, a job which the secular Iraqiyya had been seeking. The position is potentially useful, though particularly as a tool of obstruction. The challenge for the Kurds is that their long list of demands to Maliki (the 19 points) involve complicated pieces of legislation on issues like the presidency council and energy that are likely to stay in parliament for a very long time before they ever reach the legal committee, no matter what Shwani does (or what Maliki has promised). Ultimately, though, it is likely that these elected forums, rather than backroom deals, will decide the overall structure of Iraq’s oil-export regime in the long run, regardless of whether some kind of short-term fudge will enable oil to flow from Kurdistan in the near future.

To read comments please click on:

http://gulfanalysis.wordpress.com/2011/02/02/false-alarm-on-oil-exports-or-not/#comments

KRG-Baghdad dispute export agreement

Iraq Oil Report
Friday, 8 May 2009


By BEN LANDO
Iraq Oil Report

The Kurdistan Regional Government (KRG) of Iraq announced Friday it will begin June 1 sending oil from the Tawke and Taq Taq fields to the northern Iraq export pipeline.
The Ministry of Oil in Baghdad has not confirmed the agreement. The ministry, which has sparred with the KRG over the rights to sign oil deals and set oil policy, would need to OK the field’s entry into the export pipeline. Spokesman Assem Jihad told Reuters no agreement has been reached.

These exports have been held up as the central and regional governments dispute the rights to sign oil deals and the mechanisms for revenue to be collected and redistributed, including to the producing companies.

The Tawke pipeline ended in Feshkhabor near the Turkish border as of June 2008, not yet connected. It has since been tied into the export line from Kirkuk. In the background is the metering station which the oil flows through before entering Turkey. (source: Ben Lando)
Baghdad says the KRG’s two-dozen oil deals and regional oil law undermine state authority of the oil sector. Oil Minister Hussain al-Shahristani has since called the deals illegal and blacklisted companies who signed with the KRG from buying Iraqi oil or signing deals. The KRG says it has the rights under the “new” Iraq’s federalist system.

Iraq exports about 1.8 million barrels per day (bpd), earning more than 91 percent of state income.

The Tawke field, operated by Norway’s DNO, on June 1 will produce “at an initial rate of around 60,000 barrels per day,” KRG Natural Resources Minister Ashti Hawrami said in a statement. “This follows the completion of all the metering instrumentation and the tie-in of the field pipeline with the Iraq-Turkey main export pipeline at the border town of Fishkhabur.”

Another 40,000 bpd is to be added in June from the Taq Taq field, operated by Turkey’s Genel Enerji and Canada’s Addax Petroleum. Until a pipeline is built linking the field to the export pipeline, the crude will be trucked from the field to be loaded into the export line.
“This will be a temporary measure and will continue until a field pipeline is laid between the Taq-Taq field and the Khurmala Station,” Hawrami said.

Hawrami’s statement also claims the quality of the Iraq oil exports will be improved by the added oil from the semi-autonomous three northern provinces that constitute the KRG. There were claims from Baghdad earlier this week the oil would be downgraded by the additional flow.
A ceremony is set for June 1, Hawrami said, and officials from the KRG and Baghdad governments are invited.

Currently, small amounts of oil are produced in the KRG, sold to the domestic market.

Hawrami told Iraq Oil Report last month the KRG could produce 250,000 bpd by the end of this year or early 2010, with plans to build pipelines with a capacity of 570,000 bpd.

http://www.iraqoilreport.com/the-biz/iraq-oil-exports-get-kurdish-boost/1420/

CRISIS GROUP M-E REPORT: OIL FOR SOIL

OIL FOR SOIL: TOWARD A GRAND BARGAIN
ON IRAQ AND THE KURDS
Middle East Report N°80 – 28 October 2008


TABLE OF CONTENTS

EXECUTIVE SUMMARY AND RECOMMENDATIONS................................................. i
I. INTRODUCTION............................................................................................................. 1
II. THE DISPUTED TERRITORIES CONUNDRUM ...................................................... 5
A. TERRITORIES IN DISPUTE ..........................................................................................5
B. A NEW UN ROLE................................................................................................................7
C. RESPONSES TO UNAMI’S PROPOSALS........................................................................11
III. ESCALATING CONFLICT OVER OIL...................................................................... 14
A. DEVELOPING KURDISTAN’S OIL WEALTH..................................................................................15
B. OIL IN KIRKUK AND OTHER DISPUTED TERRITORIES .................................................................19
C. THE BATTLE OVER THE HYDROCARBONS LAW..........................................................................23
IV. POSSIBLE COMPROMISE SOLUTIONS.................................................................26
A. A TERRITORIAL COMPROMISE ..............................................................................26
B. A GRAND BARGAIN ......................................................................................................27
V. CONCLUSION................................................................................................................ 32
APPENDICES
A. MAP OF IRAQ..................................................................................................................34
B. MAP OF DISPUTED TERRITORIES CLAIMED BY THE KRG.................................................................35
C. MAP OF OIL AND GAS CONCESSIONS IN THE KURDISTAN REGION....................................................36
D. MAP OF OIL AND GAS RESOURCES IN THE KURDISTAN REGION AND DISPUTED TERRITORIES..........37
E. MAP OF GOVERNORATES AND DISTRICTS ....................38
F. ABOUT THE INTERNATIONAL CRISIS GROUP ...............39
G. CRISIS GROUP REPORTS AND BRIEFINGS ON THE MIDDLE EAST AND NORTH AFRICA......................40
H. CRISIS GROUP BOARD OF TRUSTEES...............................................42

Please click on the link below to read the Crisis Group Report:

http://www.crisisgroup.org/library/documents/middle_east___north_africa/iraq_iran_gulf/80_oil_for_soil___toward_a_grand_bargain_on_iraq_and_the_kurds.pdf

Top Kurdish politician and legislator: The oil deals the KRG and the Central Government in Baghad are signing are illegal

The oil deals the Kurdish regional government and the central government in Baghdad are signing are illegal, according to a top Kurdish politician and legislator.

Mahmoud Othman, the head of the powerful Kurdish bloc in Iraqi parliament, described the signing of these deals as “a premature and out-of-lace move” in the absence of a national law organizing the exploitation of the country’s oil riches.

Othman is the first senior Kurdish officials to criticize the oil development deals the Kurdish regional government has signed, the Iraqi daily, Azzaman reported.

It's the Oil, stupid!

Khaleej Times Online


BY NOAM CHOMSKY
8 July 2008



The deal just taking shape between Iraq's Oil Ministry and four Western oil companies raises critical questions about the nature of the US invasion and occupation of Iraq — questions that should certainly be addressed by presidential candidates and seriously discussed in the United States, and of course in occupied Iraq, where it appears that the population has little if any role in determining the future of their country.

Negotiations are under way for Exxon Mobil, Shell, Total and BP — the original partners decades ago in the Iraq Petroleum Company, now joined by Chevron and other smaller oil companies — to renew the oil concession they lost to nationalisation during the years when the oil producers took over their own resources. The no-bid contracts, apparently written by the oil corporations with the help of U.S. officials, prevailed over offers from more than 40 other companies, including companies in China, India and Russia.

"There was suspicion among many in the Arab world and among parts of the American public that the United States had gone to war in Iraq precisely to secure the oil wealth these contracts seek to extract," Andrew E. Kramer wrote in The New York Times.

Kramer's reference to "suspicion" is an understatement. Furthermore, it is highly likely that the military occupation has taken the initiative in restoring the hated Iraq Petroleum Company, which, as Seamus Milne writes in the London Guardian, was imposed under British rule to "dine off Iraq's wealth in a famously exploitative deal."

Later reports speak of delays in the bidding. Much is happening in secrecy, and it would be no surprise if new scandals emerge.

The demand could hardly be more intense. Iraq contains perhaps the second largest oil reserves in the world, which are, furthermore, very cheap to extract: no permafrost or tar sands or deep sea drilling. For US planners, it is imperative that Iraq remain under U.S. control, to the extent possible, as an obedient client state that will also house major U.S. military bases, right at the heart of the world's major energy reserves.

That these were the primary goals of the invasion was always clear enough through the haze of successive pretexts: weapons of mass destruction, Saddam's links with Al-Qaeda, democracy promotion and the war against terrorism, which, as predicted, sharply increased as a result of the invasion.

Last November, the guiding concerns were made explicit when President Bush and Iraq's Prime Minister Nouri Al Maliki signed a "Declaration of Principles," ignoring the U.S. Congress and Iraqi parliament, and the populations of the two countries.

The Declaration left open the possibility of an indefinite long-term U.S. military presence in Iraq that would presumably include the huge air bases now being built around the country, and the "embassy" in Baghdad, a city within a city, unlike any embassy in the world. These are not being constructed to be abandoned.

The Declaration also had a remarkably brazen statement about exploiting the resources of Iraq. It said that the economy of Iraq, which means its oil resources, must be open to foreign investment, "especially American investments." That comes close to a pronouncement that we invaded you so that we can control your country and have privileged access to your resources.
The seriousness of this commitment was underscored in January, when President Bush issued a "signing statement" declaring that he would reject any congressional legislation that restricted funding "to establish any military installation or base for the purpose of providing for the permanent stationing of United States Armed Forces in Iraq" or "to exercise United States control of the oil resources of Iraq."

Extensive resort to "signing statements" to expand executive power is yet another Bush innovation, condemned by the American Bar Association as "contrary to the rule of law and our constitutional separation of powers." To no avail.

Not surprisingly, the Declaration aroused immediate objections in Iraq, among others from Iraqi unions, which survive even under the harsh anti-labour laws that Saddam instituted and the occupation preserves.

In Washington propaganda, the spoiler to US domination in Iraq is Iran. U.S. problems in Iraq are blamed on Iran. US Secretary of State Condoleezza Rice sees a simple solution: "foreign forces" and "foreign arms" should be withdrawn from Iraq — Iran's, not ours.

The confrontation over Iran's nuclear programme heightens the tensions. The Bush administration's "regime change" policy toward Iran comes with ominous threats of force (there Bush is joined by both US presidential candidates). The policy also is reported to include terrorism within Iran — again legitimate, for the world rulers. A majority of the American people favours diplomacy and oppose the use of force. But public opinion is largely irrelevant to policy formation, not just in this case.

An irony is that Iraq is turning into a US-Iranian condominium. The Maliki government is the sector of Iraqi society most supported by Iran. The so-called Iraqi army — just another militia — is largely based on the Badr brigade, which was trained in Iran, and fought on the Iranian side during the Iran-Iraq war.

Nir Rosen, one of the most astute and knowledgeable correspondents in the region, observes that the main target of the US-Maliki military operations, Moktada Al Sadr, is disliked by Iran as well: He's independent and has popular support, therefore dangerous.

Iran "clearly supported Prime Minister Maliki and the Iraqi government against what they described as 'illegal armed groups' (of Moktada's Mahdi army) in the recent conflict in Basra," Rosen writes, "which is not surprising given that their main proxy in Iraq, the Supreme Iraqi Islamic Council dominates the Iraqi state and is Maliki's main backer."

"There is no proxy war in Iraq," Rosen concludes, "because the U.S. and Iran share the same proxy."

Teheran is presumably pleased to see the United States institute and sustain a government in Iraq that's receptive to their influence. For the Iraqi people, however, that government continues to be a disaster, very likely with worse to come.

In Foreign Affairs, Steven Simon points out that current US counterinsurgency strategy is "stoking the three forces that have traditionally threatened the stability of Middle Eastern states: tribalism, warlordism and sectarianism." The outcome might be "a strong, centralised state ruled by a military junta that would resemble" Saddam's regime.

If Washington achieves its goals, then its actions are justified. Reactions are quite different when Vladimir Putin succeeds in pacifying Chechnya, to an extent well beyond what Gen. David Petraeus has achieved in Iraq. But that is THEM, and this is US. Criteria are therefore entirely different.

In the US, the Democrats are silenced now because of the supposed success of the US military surge in Iraq. Their silence reflects the fact that there are no principled criticisms of the war. In this way of regarding the world, if you're achieving your goals, the war and occupation are justified. The sweetheart oil deals come with the territory.

In fact, the whole invasion is a war crime — indeed the supreme international crime, differing from other war crimes in that it encompasses all the evil that follows, in the terms of the Nuremberg judgment. This is among the topics that can't be discussed, in the presidential campaign or elsewhere. Why are we in Iraq? What do we owe Iraqis for destroying their country? The majority of the American people favour US withdrawal from Iraq. Do their voices matter?

Noam Chomsky's writings on linguistics and politics have just been collected in "The Essential Noam Chomsky," edited by Anthony Arnove, from the New Press. Chomsky is emeritus professor of linguistics and philosophy at the Massachusetts Institute of Technology in Cambridge, Mass.
http://www.khaleejtimes.com/DisplayArticleNew.asp?col=&section=opinion&xfile=data/opinion/2008/July/opinion_July32.xml

OIL GIANTS ARE BACK, by Juan Cole

Courtesy BBC

http://www.juancole.com/

They're Baaack; It is Politically Inconvenient to Acknowledge . . .

The consortium of American and European oil companies that had dominated Iraqi petroleum in the twentieth century is returning to Iraq to carry out service agreements aimed at expanding production in four southern oil fields.

Jonathan Steele reports,

' But the deals, known as service contracts, are unusual, said Greg Mutitt, co-director of Platform, an oil industry research group. "Normally such service contracts are carried out by specialist companies ... The majors are not normally interested in such deals, preferring to invest in projects that give them a stake in ownership of extracted oil and the potential for large profits.

The explanation is that they see them as a stepping stone..."He said the companies' lawyers had been insisting "on extension rights under which each company would get first preference on any future contract for the field on which it has worked".'

Patrick Cockburn has more.

Bush and Cheney clearly went into Iraq primarily in order to put US petroleum firms in precisely this favored position. The US power elite wanted this outcome and connived actively at it.

As Alan Greenspan put it, “I am saddened that it is politically inconvenient to acknowledge what everyone knows: the Iraq war is largely about oil.”

Poor Iraq has been looted, occupied, and disrupted by the industrialized West for a century because of the curse of its oil wealth.

The Iraqi Petroleum Company was until 1929 the Turkish Petroleum Company since it began in 1912 with a concession from the Ottoman Empire, which ruled Iraq before the 1917 British conquest. The victors of World War I used their victory to leverage themselves into Iraqi oil. The Ottomans had thrown in with Germany and Austria in 1914, and were defeated by the victorious allies.

Iraq was considered a successor state to the Ottomans in its territory and so shared in the ignominy and disadvantage of defeat. A German company was one of the original concessionaries, but the French usurped its shares as a spoil of war; that was how the Compagnie Francaise des Petroles, now Total, got into Iraq. And, as one of the victors in the war, the US pressed claims to enter the concession, with its oil majors eventually being awarded a quarter of the shares.

The San Remo conference of 1920 deeply disappointed Iraqis by awarding the country to Britain as a League of Nations Mandate, or colony with term limits. The Iraqis had wanted immediate independence, and launched a months-long revolution against the British that summer. San Remo did set aside a 20 percent share in the oil concession for Iraqis, but the Western petroleum companies refused to allow implementation of that provision, locking Iraqis out of any possession of their own petroleum. They did offer to pay the Iraqi government a small royalty based on their profits, but said that would not kick in for 20 years!

The Iraqi Petroleum Company was notorious for not training Iraqis to fill management positions, implementing a typical colonial business model.

In 1958 the British-installed monarchy was overthrown in Baghdad by an officers' coup that was accompanied by popular revolt. Gen. Abd al-Karim Qasim [Kassim] in 1961 issued Law 80, revoking the Iraqi Petroleum Company's claims on undeveloped fields in the rest of Iraq, beyond the ones they already had developed. He set March, 1963, as the date on which the decree would be implemented. In February, 1963, he was overthrown by the Baath Party. It is rumored that the US was complicit with that coup, and some Baathists who made it said so. The US also certainly did have foreknowledge of it.

If Washington thought the Baath would revoke Law 80, however, they were disappointed. The Baath did cooperate in destroying the Iraqi Communist Party, but it kept Qasim's oil law. The Iraq Petroleum Company retaliated by keeping Iraq's production relatively low and so starving the government of oil rents, and by not giving Baghdad as favorable terms as some other OPEC countries. After 8 months, the Baath was overthrown by another clique of officers, who ruled until 1968.

The nationalist officers in Iraq were outraged by US and Dutch support of Israel in the 1967 war, and joined an oil boycott of the West that began that June. The nationalist Iraqi regime also put pressure on other Gulf oil countries to take control of their resources away from American firms that were essentially allied with Israel via their government in Washington. The later round of oil nationalizations were in some ways Arab revenge for the humiliating defeat in 1967.

In 1968 the Baath returned to power in a second coup, and in 1971 President Ahmad Hasan al-Bakr nationalized the IPC. Below is an initial CIA analysis of the 1972 nationalization of Iraqi petroleum. I am omitting the Agency's incorrect prediction that Iraq would find it difficult to market its nationalized petroleum.

The CIA could not have foreseen the 1973 Arab oil boycott or the quadrupling of oil prices in the rest of the 1970s.

Foreign Relations of the United States, 1969-1976, Volume E-4, Documents on Iran and Iraq, 1969-1972

"CENTRAL INTELLIGENCE AGENCY Directorate of Intelligence

June 1972

INTELLIGENCE MEMORANDUM

SOME IMPLICATIONS OF IRAQ'S OIL NATIONALIZATION

Introduction

1. In a sudden and dramatic move on 1 June 1972, the Iraqi government nationalized all the assets of the Iraq Petroleum Company (IPC), a consortium of US, British, Dutch, and French oil firms operating in northern Iraq. The nationalization culminates 11 years of smoldering disputes between the members of the oil consortium and the Iraqi government. The same group of oil firms also controls the only two other non-government oil-producing companies in Iraq – the Mosul Petroleum Company (MPC) and the Basrah Petroleum Company (BPC). These companies, which have less production than the IPC, have not been affected by the nationalization decree. In concert with the Iraqi move, the Syrian government seized the Syrian portion of the IPC pipeline through which the oil produced in northern Iraq is transported to ports on the eastern Mediterranean. This memorandum describes the events leading up to the nationalization and analyzes Iraq's ability to maintain output and sales of the newly acquired oil. In addition, the possible repercussions on the Iraqi economy and the world oil market resulting from the action are discussed . . .

Discussion

Background

2. The source of the present conflict between Iraq and IPC is rooted in "Law 80" promulgated in 1961 [by Abd al-Karim Qasim (Kassim)]. From 1925 until 1961, IPC held concessions in Iraq covering virtually the entire country. This law withdrew from IPC all concession acreage not then being worked by IPC companies – an area amounting to more than 99% of the total. The canceled concessions included the potentially prolific North Rumaila oilfield that IPC had discovered and partly developed, but from which production had not yet begun.

The companies refused to acknowledge the validity of the law, and for more than a decade the dispute simmered. Intermittent government-company discussions failed to resolve the issue. In retaliation, IPC refused to grant Iraq the same financial benefits that other members of the Organization of Petroleum Exporting Countries (OPEC)* were able to obtain in the mid-1960s, such as expensing royalties. This action has led to an Iraqi claim for back payments of nearly $400 million. Negotiations on the back payments claims and the North Rumaila issue took place again in January and February 1972 but ended in deadlock primarily because of IPC's adamant stand on compensation for the loss of the North Rumaila oilfield. . .

3. Tensions between IPC and the government were accentuated when oil production from the northern oilfields dropped sharply during March, April, and early May 1972. The Iraqis regarded this cutback as a further attempt to apply retaliatory pressure against the government following the breakdown of negotiations in February. By mid-May as the Revolutionary Command Council (RCC) saw the serious downturn in government oil receipts, which are vitally needed for political as well as economic reasons, IPC was threatened with confiscatory legislation if the company did not increase production from the northern oilfields, agree on a long-term production program, and make a "positive offer" on the other outstanding issues.

On 31 May, IPC agreed to increase production from the northern oilfields and to set up a long-range production program but continued to demand compensation for the loss of North Rumaila. By then the RCC had already decided on the need for a dramatic political move, and Oil Minister Hamadi rejected the proposal out-of-hand, insisting that Iraq would never pay compensation for the North Rumaila field. The nationalization law was adopted the next day.

4. IPC has six shareholders: British Petroleum (BP), Shell Petroleum, and Compagnie Francaise des Petroles (CFP) [Total], each with 23.75%; the two American oil companies, Mobil and Standard Oil (New Jersey)[now Exxon], are equal partners in the Near East Development Corporation and jointly own another 23.75%; and the C.S. Gulbenkian Estate owns the remaining 5%. The company's production comes mainly from the Kirkuk oilfield in northern Iraq and is exported via pipeline across Syria to the eastern Mediterranean ports of Banias in Syria and Tripoli in Lebanon.

Prospects for Iraq's Producing and Marketing the Oil

5. Although production has apparently now been stopped on orders from Baghdad, output could begin on short notice. Maintaining output from the nationalized facilities and transporting the oil from the Kirkuk field to the Mediterranean ports should pose no insurmountable problems for the Iraqis. The operation of the northern fields is already almost entirely in the hands of Iraqi nationals who are expected to remain under the new ownership. The Syrians similarly should encounter little difficulty operating the IPC pipeline.

6. Production is not the problem, however. The most serious problem facing the Iraqis is finding buyers. The companies comprising IPC control a large share of the world oil market. It is unlikely that they would agree to market the nationalized oil without an Iraqi commitment for prompt and adequate compensation. . . "

Well, the compensation hasn't been prompt. It is now likely to be adequate.