KurdistanObserver.com
A Foreign Company Executive: A KRG Agreement Is Now The
Kiss Of Death In Baghdad
Kurdistan Dispute Damps Hopes Of Further Rise in Iraqi Exports
By Steve Negus, Iraq Correspondent, and Dino Mahtani in,London
Financial Times
November 22 2007
Iraq said yesterday it had boosted oil exports to nearly 2m barrels a day,
thanks to the opening of a pipeline to Turkey. However, hopes for future
increases could be damped by an increasingly vicious dispute between the Baghdad
oil ministry and the northern Kurdistan autonomous region.
Falah Alamri, director general of Iraq's State Oil Marketing Organisation, told
an international security forum in Bahrain that exports were now 1.8m-1.9m b/d,
and production was 2.5m b/d - the highest that it has been since late 2004.
Iraqi exports in September reached 1.9m b/d, a postwar record, and unlike
earlier spikes the increase appears to have been sustained.
The principal reason for the increased exports are the 300,000 b/d now traveling
from the northern Kirkuk region to the Turkish Mediterranean port of Ceyhan. The
new pipeline, which had been paralyzed by attacks, opened in August.
Mr Alamri said production could increase to 3m b/d by the end of 2008 and to 6m
b/d within six years.
However, Iraq's chances of attracting foreign investment into the sector depend
heavily on the passage of a law regulating the oil industry and the chances of
its swift passage have been set back by an increasingly -bitter exchange of
accusations between Baghdad and Kurdistan officials.
The KRG and Baghdad have been deadlocked for more than a year on details of the
proposed law and are now clashing over who has the right to sign deals with oil
companies in the interim.
The Kurdistan government says Iraq's constitution gives it the right to develop
new oil fields in its territory, and it last week announced five new exploration
deals with companies from -Britain, South Korea and elsewhere.
The Iraqi press yesterday quoted Hussein al-Falluji, a lawmaker from the
Sunni-led Iraqi Consensus Front, as saying parliament was preparing a blacklist
of companies that had signed contracts with the Kurdistan Regional Government.
The statement echoed remarks by Hussein al-Shahristani, the oil minister who
last week warned that any oil company that signed a contract without federal
government approval would "compromise their chances of getting business in
future in Iraq".
Mr Shahristani also said that he would use legislation in force during the
regime of the deposed president Saddam Hussein to strike deals with foreign
groups.
In a statement released late on Tuesday, the KRG accused Mr Shahristani of
having "chosen to side with anti-Kurdish elements from the Saddam era" and also
of incompetence.
"Dr Shahristani has failed to deliver any meaningful projects through his
ministry year after year. He has not managed to spend even a quarter of the
annual federal budget allocated to his ministry and is now trying also to deter
others from doing the right thing for the country."
Despite the KRG's insistence that it has the constitution on its side, the
leverage Baghdad enjoys thanks to its control over the vast oil fields in
southern Iraq will probably deter most big oil companies from doing business in
Kurdistan.
"A KRG agreement is now the kiss of death in Baghdad," said one foreign company
executive who does business in Iraq.
However, Baghdad itself could face difficulties lining up foreign investment
deals as long as the law remains in dispute.
