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Saturday, September 22, 2007

Oil and Corruption in Iraq

This article gives quite a bit of detailed information about oil field development by foreign companies in Kurdistan. It is from this site.

Oil and Corruption in Iraq Part III
Kurdistan's Gushing Crude Spawns Conflict

KIRKUK, Iraq, September 12, 2007 (ENS) - The German seismologist working in northern Iraq was not supposed to talk about his job. But after having spent nearly three months in an isolated camp near the Taq Taq oilfields, he could not contain himself.

"You can dig where you want," he said. "The crude gushes!"

For more than two years, foreign companies have been hunting - and finding - oil in the semi-autonomous Kurdish region. They may not have discovered giant fields like the famous Baba Gurgur near Kirkuk, but the oil companies and their Kurdish clients are very pleased.



Iraq has 115 billion barrels of proven oil reserves, but its actual oil wealth is believed to be significantly higher. Iraqi Kurdistan and the oil-rich region of Kirkuk are prime territories for speculators because of their large proven and potential reserves.

The three northern provinces of Iraqi Kurdistan are also the safest region in Iraq, an additional draw for drillers and investors. The Kurdistan Regional Government, KRG, has pushed ahead with exploration in the north by signing contracts for oil exploration with foreign companies.

That has irked oil officials in central government in Baghdad, however, and the KRG's windfall is far from secure. It is threatened by uncertainty surrounding a new national law on Iraq's oil reserves; by Turkish concerns over Kurdish strength; and by pressure from rival ethnic groups whose territories are not so blessed with natural resources.

In early 2006, the first foreign oil company began producing new oil out of Kurdistan. The Norwegian wildcatter Det Norske Oljeselskap, DNO, sealed two production-sharing agreements with the regional government in 2004, gaining a 55 percent stake in both licenses. DNO will take 10 to 30 percent of the profits; the rest will go to the region.

At first, DNO estimated that the Tawke field near the city of Dohuk held 100 million barrels and would reach peak production of 50,000 barrels a day next year. Now, it appears that the field may contain much more.

DNO's most recent operation in Tawke has a flow rate of 12,000 barrels a day, 40 percent more than another well in the same area.


Oil rig at the Det Norske Oljeselskap Tawke #1 field in Kurdistan. Test production is scheduled to begin this year. (Photo courtesy Kurdistan Tourism)
DNO has 80 trucks moving as much as 10,000 barrels a day from the site. The flow rate may reach 20,000 to 25,000 barrels per day, but transporting this amount of crude by road could be logistically difficult and expensive.

A second lot of drilling began in May 2006 in the Taq Taq region, south of Sulaimaniyah, and was led by Taq Taq Operating Company, also known as TTopco, and Addax Petroleum, a Swiss-Canadian company. TTopco, a joint venture with Genel Enerji of Turkey, is currently drilling its fourth oil well and hopes to drill two more by end of 2007.

The three oil wells that TTopco has already drilled are expected to produce 75,000 barrels a day, said Kemal Afaraci, an official with TTopco. Oil reserves in Taq Taq are estimated at 1.2 billion barrels.

Firms such as Canada's Western Oil Sands and Heritage Oil Corp as well as the UK's Sterling Energy are also exploring the region.

Kurdistan wants to produce 200,000 barrels a day of oil by the end of next year, and increase that to one million barrels per day within five years.

Although northern Iraq's oil reserves are not as large as the giant southern fields round Basra, the local KRG Natural Resources Minister Ashti Hawrami has said the area has "good potential", estimating reserves around 25 billion barrels of oil and 100 trillion cubic feet of natural gas.

He also held out the prospect of a second export pipeline from Kirkuk to the Turkish port of Ceyhan, which would run through Kurdish-controlled territory, thus giving it greater protection from the sabotage attacks that plague pipelines elsewhere in the country.

Kirkuk alone has 10 billion proven barrels, and Hawrami has estimated that 20 billion barrels are lying in other disputed areas in the north.

Based on these estimates, if the Kurds control the north - including parts of Nineweh province, where the KRG already has a strong political and security presence, their potential reserves would be about 55 billion barrels, or almost half of Iraq's known oil reserves.

That would mean Iraq's Kurds would have more oil than Nigeria, Africa's biggest oil producer.

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