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.

Western Oil Major makes bid for Kurdistan oil

No mention of who the majors were. They are all in the wings waiting for the oil law. Well actually they are meeting in September even though the oil law probably will not be passed. This is from Times on Line.


From The TimesAugust 23, 2007

Western oil major’s bid marks breakthrough for troubled Iraqi industry

Carl Mortished, International Business Editor
The prospects for Kurdish oil were given a boost yesterday when DNO, a Norwegian explorer, said that a big oil company had offered $700 million (£351 million) for its licence in Kurdistan.

The indicative offer for the licence, which was rejected by DNO, includes its discovery at Tawke, in northeastern Iraq, in territory administered by the Kurdistan Regional Government (KRG), and represents almost half the value of DNO. It sent the Norwegian explorer’s shares up 12 per cent on the Oslo bourse.

DNO declined to name the interested purchaser, describing it as “a large international oil company”. Speculation yesterday centred on Statoil, the Norwegian oil multinational, which recently revealed plans to open an office in Erbil, the capital of the Kurdish region, to study exploration opportunities in the region.

A bid by a big Western oil group for a Kurdish oil licence would be the first significant foreign investment in Iraq’s oil industry. The threat of kidnappings and violence has kept foreign investors from the vast oil reserves in southern Iraq, while political risk has deterred oil majors from setting foot in the Kurdish region.

Oil industry experts also pointed to Indian or Chinese companies, which have been aggressive in their pursuit of oil assets, and they highlighted the significant risk for a Western oil major in making a Kurdish investment. “No oil major would invest in the Kurdish region because they know it will wreck their chances in southern Iraq,” the chief executive of one oil company with interests in the region said.

DNO’s activity in Kurdistan and its Tawke find have fuelled controversy in Iraq and created friction between the KRG and the national Government in Baghdad, which resented the issuing of oil exploration licences by the Kurdish administration.

The Norwegian explorer acquired its licence in 2004 and confirmed its discovery at Tawke in 2005, but development of the prospect has been dogged by quarrels between Erbil and Baghdad over ownership of mineral rights and agreement over a federal Iraqi petroleum law, which would create a legal regime for oil exploration. Development of Kurdistan’s oil prospects is believed to be a key plank in the KRG’s softly-softly strategy of creating an independent Kurdish state. The KRG has issued licences to a number of other companies, including Addax Petroleum, a Canadian explorer, which hopes to develop the Taq Taq field in collaboration with Genel Enerji, a Turkish oil business.

Agreement with Baghdad over the oil law is essential to enable oil exports to be made from the region. DNO has laid a pipeline to connect the Tawke oilfield with Iraq’s main northern export pipeline, which links the Kirkuk oilfield to the Turkish port of Ceyhan. The final link to the export route awaits the passage of the oil law in Baghdad, which DNO hopes will occur in September.

The northern export route has been shut since the American-led invasion of Iraq because of bombings of the pipeline by insurgents. Closure of the northern pipeline has hit efforts to raise Iraqi oil exports above their present 1.7 million barrels per day (bpd) to prewar levels as high as 2.5 million bpd.

The Iraqi Government is trying to rebuild the pipeline, but the explorers in Kurdistan hope that a link to the export route near the Turkish border will secure their exports and avoid the violence taking place in the Kirkuk region. Hussain al-Shahristani, the Iraqi Oil Minister, expressed confidence this week that the Iraqi parliament would pass the oil law soon.

However, the minister hinted that resolution of the dispute between Baghdad and Erbil was still not assured. He said that the new law would review oil and gas deals struck by Saddam Hussein and the KRG to “guarantee total national control and the highest return for Iraq” and added: “Any contract that contradicts this has to be redrawn.”

The KRG has accepted the principle that all oil revenues should be divided between the Iraqi regions, but insists that its region must be compensated for oppression of it during the Saddam regime, when it was excluded from participating in the oil wealth.

DNO yesterday revealed further progress at its Tawke prospect, with the appraisal of a further well, drilling deeper into the reservoir. It said that a test had achieved flow rates of 8,000 bpd from its Tawke 8 well.

Takeover speculation has swirled over DNO before. In January, its shares rose 16 per cent when a major shareholder said that he had received an offer for his 5 per cent stake.