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As Iraq smolders, Kurds sit on oil riches
by Staff Writers
Irbil, Iraq (UPI) Dec 22, 2011

As Iraq looks like collapsing into another sectarian free-for-all, with energy resources a key prize, the semi-autonomous Kurdish region is like an island of stability and security.

In large part, that's because it's sitting on its own energy treasure house, an estimated 60 trillion cubic feet of natural gas, more than Libya's entire reserves, and 45 billion barrels of oil, roughly the amount Britain has produced from its North Sea fields.

"Sweeping changes … have taken place in Iraq's semi-autonomous northern region over the past decade, changes driven by the wealth that lies underneath its desolate landscape," observed the Financial Times.

"The days when Kurdistan was an economic backwater are over," Prime Minister Barham Salih told Kurdistan's first regional oil and gas conference in Irbil, the Kurdish capital, in November.

But the Kurdistan Regional Government, which runs the three northern provinces that constitute the Kurdish enclave, is locked in a bitter battle with the central government in Baghdad over oil rights and revenue-sharing as well as territory.

This seemingly intractable dispute has in recent weeks spread to other provinces that now seek more autonomy, including oil-rich Basra in the south, which contains two-thirds of Iraq's known oil reserves of 143.1 billion barrels.

With the Shiite-dominated government of Prime Minister Nouri al-Maliki showing increasing signs of cracking down on minority Sunnis and Kurds, marginalizing them politically and concentrating all power in the hands of the majority Shiites now that U.S. forces have withdrawn, the stage seems set for major turmoil.

The KRG recently upped the stakes dramatically by signing an agreement with Exxon Mobil, the world's largest oil company, Oct. 18 to explore six blocks widely believed to be sure-fire gushers.

Exxon was the first international oil major to venture into Kurdistan, defying Maliki's government, which insists Baghdad alone can make such deals.

Exxon faces stiff reprisals by Baghdad but refuses to back down.

Meantime, as political infighting intensifies with the departure of the Americans, the Kurds and Sunnis are quitting Maliki's shaky coalition amid a wave of arrests by his security forces.

So Kurdistan, which also claims the Kirkuk oilfields in the north, is likely to be in the eye of the storm.

The Kurds' big problem is that their territory in the northeastern corner of Iraq is landlocked and to get their oil out they have to use state pipelines controlled by Baghdad.

Kurdish oil is pumped northward through twin pipelines to neighboring Turkey's Ceyhan terminal on the Mediterranean, so any break with Baghdad means no outlet for Kurdish crude.

But the Kurds have found a possible ally in Turkey, even though Ankara's a bitter opponent of the Kurds' burning ambition for an independent state.

The Turks fear an independent Kurdistan will encourage their own Kurdish rebels in their 20-year separatist war, as well as the wider region's 20 million Kurds.

Even so, Ankara may find Iraqi Kurds' support for the Turkish rebels might be dampened if Turkey gives the KRG separate access to Ceyhan.

Turkey, with no energy resources of its own, is particularly eager to import natural gas to fuel its power stations, possibly via a new pipeline from Kurdistan.

"The large deposits of natural gas in Iraqi Kurdistan and a booming bilateral trade -- together with a better mutual security understanding -- have led to much-improved relations," the Financial Times' Commodities Editor Javier Blas reported.

The presence of senior Turkish officials at the Irbil oil and gas conference testified to that.

"Turkey is even talking about connecting an export pipeline from Kurdistan to the projected Nabucco pipeline which would link the gas-rich Caucasus and Central Asia to energy-hungry European nations," said Blas.

Kurdistan is currently capable of producing 100,000 barrels of oil per day. That's scheduled to hit 175,000 bpd in 2012.

But if Exxon Mobil or any of the 40 smaller outfits that also have contracts with the KRG strike it big, KRG Natural Resources Minister Ashti Hawrami says production could reach 1 million bpd by 2015.

If Iraq starts to fragment, that could convince other oil majors to invest in Kurdistan.

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Iraq PM was informed of Exxon deal: Kurdish leader
Arbil, Iraq (AFP) Dec 23, 2011 - The leader of Iraqi Kurdistan said Friday that a contract the autonomous region signed with US energy giant ExxonMobil was constitutional and claimed Iraq's premier had initially given his assent.

On October 18, Kurdish authorities inked a deal with ExxonMobil for it to explore six areas in Kurdistan, but Baghdad regards as invalid any contracts not signed with the central government.

"We sent a letter to (Prime Minister) Mr Nuri al-Maliki to inform him of the matter, and we informed him that we will tell him all the developments, and he did not object," Kurdish president Massud Barzani said at a speech in the northern city of Dohuk.

"We sent him a letter to inform him of the details when it came time to sign the contract, and he said, 'good', but in the end, they protested and said it was not in accordance with the constitution."

Barzani also insisted that the contract complied with Iraq's constitution.

Maliki told AFP on December 15 that ExxonMobil had promised to reconsider the exploration deal, but did not elaborate.

The Kurdistan contract potentially puts an Exxon contract with the Iraqi government in jeopardy.

In January 2010, Iraq's oil ministry completed a deal with ExxonMobil and Anglo-Dutch giant Shell to develop production at West Qurna-1, which with reserves of about 8.5 billion barrels is the country's second-biggest field.


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