by Kathleen Ridolfo

03-12-05 Sunni and Shi'ite Arab leaders in Baghdad questioned the authority of the Kurdistan Regional Government after it began drilling for oil in the Dahuk Governorate.
Several Arab leaders in Baghdad claimed that Kurdistan did not have the authority constitutionally to undertake a venture, particularly without the approval of the central government. Kurdish authorities however, maintained that it is their right to develop and control oil resources in their region.

The Kurdistan Regional Government and the Norwegian oil company DNO broke ground on an oil-prospecting venture in the village of Tawuke, located in the Dahuk Governorate on 29 November. Dahuk Governor Tamir Ramadan told at the ground-breaking ceremony in Tawuke that the Iraqi Oil Ministry in Baghdad was well aware of the project.
"As [Kurdistan's] Prime Minister Nechirvan Barzani has noted, the Oil Ministry has helped and expended great effort [on the project] so it was a party in this project," he told.

Constitutional questions
The new Iraqi Constitution ratified on 15 November is murky on the issue, and arguably does not ban regional governments from drilling for oil in their territories. The issue, if pursued by Shi'ite and Sunni Arabs, could prove to be the Iraqi government's first constitutional dilemma.

Article 108 states, "Oil and gas are the ownership of all the people of Iraq in all the regions and governorates."

Article 109 notes: "First: The federal government with the producing governorates and regional governments shall undertake the management of oil and gas extracted from current fields [emphasis added] provided that it distributes oil and gas revenues in a fair manner in proportion to the population distribution in all parts of the country with a set allotment for a set time for the damaged regions that were unjustly deprived by the former regime and the regions that were damaged later on, and in a way that assures balanced development in different areas of the country, andthis will be regulated by law.”
"Second: The federal government with the producing regional and governorate governments shall together formulate the necessary strategic policies to develop the oil and gas wealth in a way that achieves the highest benefit to the Iraqi people using the most advanced techniques of the market principles and encourages investment."

Former Oil Minister Thamir al-Ghadban told on 30 November: "Any future [oil] research or development project on oil fields in Iraq that would be undertaken in cooperation with foreign companies must be approved by the future [Iraqi parliament's] Council of Representatives....”
“Another thing is that, according to the current law, oil research and development projects [are the sole responsibility of] the Oil Ministry and any change in [the oil] sector that is performed in cooperation with oil companies -- be they Arab or foreign, international or regional -- must also be a subject of legal regulation."

Meanwhile, Laith Kubba, spokesman for Prime Minister Ibrahim al-Ja'fari, told in Baghdad that the central government was never formally informed of the deal and would refer the matter to its legal adviser.
The issue could be further complicated after Kurdistan President Mas'ud Barzani announced in a 1 December speech in Salah Al-Din that the highly contested, oil-rich city of Kirkuk would join the Kurdistan region in 2007. The Kirkuk Governorate has some 10 bn barrels of proven reserves remaining. Any oil revenues from those reserves, according to the constitution, would fall under the control of the central government.

Turkmen and Arab residents of Kirkuk claim the two main Kurdish parties -- Barzani's Kurdistan Democratic Party and the Patriotic Union of Kurdistan led by Iraqi President Jalal Talabani -- have pursued a campaign to make Kurds a majority in Kirkuk by building settlements for Kurds displaced from the city under the Hussein regime.
Arabs and Turkmen claim the parties have relocated some 350,000 Kurds to Kirkuk since the fall of the Hussein regime. In 2007, Kirkuk residents will vote on the status of the city, and whether it should be incorporated into the Kurdistan region.

Neighbours' reactions
The issue of Kirkuk has already provoked an outspoken response from Turkey, a fervent supporter of Iraq's Turkmen population, largely concerning the situation in and around Kirkuk.
Observers had also speculated that the Kurdistan-DNO agreement might spark negative reactions from Turkey, Iran, and Syria, which all have large Kurdish populations, arguing that Kurdish government's control over the oil fields might bolster local calls to secede and establish an independent Kurdish state, which could in turn spark unrest among Kurdish populations in neighbouring states. However, there has thus far been little reaction on the Dahuk project from neighbouring states.

When Dahuk Governor Ramadan was asked if he anticipated any future regional fallout from the Dahuk drilling, he said, "The opposite is true. I think that it will have a positive impact... I do not think there will be any negative impact on the neighbouring countries," he said.
"Some companies from neighbouring countries may benefit from these important projects that will be accompanied by tourism [development] projects and other investment projects."

Turkish investors have a 15 % stake in an oil venture in another Iraqi town near Koi Sinjak (Taq Taq wells 1 and 2) between the Kurdistan-based Eagle Group and a subsidiary of the Canadian-based Heritage Oil (each own a 42.5 % stake in their new company, Heritage Erbil Oil).
Heritage Oil is also involved in talks with the central government in Baghdad to develop other fields.