The Independent Gateway to Kurdish News and Analyses

Oil in Kurdistan: A black curse or new power?

 

Kurdish Herald Vol. 1 Issue 4, August 2009 -

by Delovan Barwari

 

For many nations, oil has been the main source of economic prosperity and development. Yet, amongst Kurds, the perspective is that oil has been the underlying reason for the partitioning of their homeland, Kurdistan, and the cause to the atrocities committed against them after the British discovery of oil in Kurdistan. Hence, since the fall Saddam Hussein in 2003, Kurdish leaders tenaciously played an influential role in the establishment of the new Iraqi government, and managed to introduce a number of articles in the new Iraqi constitution to grant authority to regions like Kurdistan to dictate over matters outside the exclusive powers of Baghdad.

 

Nevertheless, Kurdistan Regional Government (KRG) has been in the center of fiery disputes with the government of Baghdad over the control of land and oil.

 

DNO Company, Norway, Iraq, and Kurdistan flags wave at the Tawke oil field in Iraqi Kurdistan - 2009

 

According to a report by George Yacu – a geophysicist and advisor to KRG – the region of Iraqi Kurdistan (including Kirkuk) lies on an estimated 43.7 billion barrels (bb) of the 115 bb of Iraq’s proven oil reserves and 25.5 of 85 bb of Iraq’s potential reserves. Furthermore, based on his report as well as older Iraqi reports and studies, it is estimated that over 100 tcf (trillion cubic feet) of gas is present in Iraq, mainly in the Kurdistan region. Moreover, the recent explorations conducted in Kurdistan increased the figure to more than 200 tcf of potential gas reserves. As the Kurdish leadership became more aware of the aforementioned facts, their inspiration to become self-sufficient (in terms of the energy and economy) grew stronger.

 

The disagreement over Iraq's oil, viewed by Kurds as political, has been the main obstacle to the establishment of laws that allow revenue sharing in the production and exploration of Iraq's oil. The failure to pass the so-called hydrocarbons law has hampered foreign attraction in the energy sector and consequently set back the development of Iraq's decayed and underdeveloped oil infrastructure. On the other hand, as KRG became aggravated with Baghdad over the standoff of the proposed law, it endorsed its own hydrocarbon laws in order to develop Kurdistan's resources. As a result, KRG has successfully made significant progress in oil exploration and infrastructure development of its new oil industry.

 

Over the years, KRG independently awarded exploration and development contracts with some 30 foreign companies. These moves resulted in a war of words between the Iraqi Oil Minister, Hussein Sharastani, and the Prime Minister of the Kurdistan Region, Nechirvan Barzani, along with Kurdistan’s Minister of Natural Resources, Ashti Hewrami. Sharastani went as far as declaring the contracts as illegal and threatened to blacklist the companies involved in the oil projects in Iraqi Kurdistan.

 

While the world economy fell into a deep recession, oil prices fell sharply, causing a considerable reduction in Iraqi national budget. Consequently, it placed considerable pressure on Maliki’s government to soften their stance with KRG over the oil disputes. On 1 June 2009, after years of heated tit-for-tat exchanges, Baghdad finally agreed to allow Kurdish oil to be exported using the Iraqi national pipeline and into the international market via Turkey.

 

Oil pipelines at the Tawke oil field in Iraqi Kurdistan - 2009

 

 

The agreement initiated the exportation of the Tawke oil field developed by Norway’s DNO International and Taq Taq oil field developed jointly by Addax Petroleum and Turkey’s Genel Enerji. The initial production in the Tawke and Taq Taq fields are estimated at around 60,000 and 40,000 barrels per day (bpd), respectively. It is believed that the two fields together have a potential of producing 250,000 bpd.

 

Under the settlement, the earnings from oil will be directly deposited into a federally managed account and the revenues will be distributed across Iraq on a per capita basis. KRG receives 17% of the earnings and 83% is given to the rest of Iraq.

 

As the success of United States in Iraq is of the highest importance to the new administration in Washington D.C., the U.S. appears to be more focused on resolving the pending issues between KRG and Baghdad. Therefore, they have placed noticeable pressure on both parties to resolve the Kurdish – Arab dilemma (viewed by many observers as the most sensitive and explosive issue) over land and oil.

 

Without a doubt, the pressure has influenced the Iraqi Prime Minister, Nuri Al-Mailki, to break the year-long deadlock. Following an official visit to Washington D.C., on 2 August 2009, Maliki flew to Kurdistan to meet with the President of Kurdistan Region, Massud Barzani, in an attempt to bring the feud over land and oil to the negotiation table. The initial reports following the meeting suggests progress. Yasin Majeed, Maliki’s media advisor stated: "The visit marked a new era. There was agreement (but) there are big challenges”.


Nonetheless, the question of whether Maliki will genuinely recognize the new reality in Kurdistan, or if he will exploit the oil and land disputes to gather momentum in his favor and unite the Shiites and Sunnis against Kurds ahead of the upcoming parliamentary elections in December is yet to be seen.

 

As the demand for the consumption of oil is on the rise throughout the world, specifically by China and India, the world economy is more than ever dependent on the production and availability of this scarce resource. With the new oil discoveries and developments in Kurdistan, will the Kurdish leaders be able to use what has been once regarded as a black curse in Kurdish circles instead as a powerful card to change U.S. and western policy?

 

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