Kurdistan signs seven oil deals and reviews old contracts

Nov 07, 2007 01:00 AM

Iraq's semi-autonomous Kurdish government said it had signed seven new oil contracts to European and Indian companies, shrugging off an heightened threat of a Turkish attack in the semi-autonomous region.
The deals come only a day after Turkish Prime Minister Recep Tayyip Erdogan said his country was ready to use its "legitimate right" to defend itself against Kurdish rebels by launching a military in this part of Iraq. The companies are joining a string of small and mid-sized companies that are taking advantage of the majors' reluctance to forge Kurdish deals for fear of alienating Iraq's central government.

But the Kurdish Regional Government, or KRG, which has de facto rule on a large part of Northern Iraq, also announced it was reviewing previous exploration deals to adapt them to a new regional oil law passed this year. The KRG said it had awarded production sharing contracts, or PSCs, to MOL of Hungary, allied with two closely tied independent oil ventures, UK-listed Gulf Keystone Petroleum and Pittsburgh-based Texas Keystone.
The government also signed separate PSCs with Austria's OMV on the other hand, and India's Reliance Energy Ltd (RIL) on the other.

Iraq is estimated to hold some 115 bn barrels of reserves, making it the third-largest holder after Saudi Arabia and Iran. Though the majority of those reserves are in the south of the country, the Northern KRG is attracting foreign companies simply because it already offers the possibility of signing production-sharing agreements, or PSCs.
The KRG also said it would review five existing contracts including those with Norway-based Det Norske Oljeselskap (DNO); Addax Petroleum and Western Zagros Resources (WZR), both from Canada. The KRG said it had "reviewed the PSCs of the companies whose contracts predate the Kurdistan Region Oil and Gas Law (enforce earlier this year) to bring them into conformity" with it.
"The results of the review, including commercial terms, have now been communicated to the PSC holders," it said.

The new deals are the first signed by the KRG since the Turkish parliament in October approved a possible armed intervention in Northern Iraq to chase the Kurdistan Workers Party, or PKK. But the deals could also increase tensions with Baghdad's central government, which has rejected the validity of previous agreements as invalid. Baghdad has yet to agree on a countrywide hydrocarbon law.
Iraqi Oil Minister Hussein al-Shahristani warned in October that Baghdad was considering blacklisting foreign oil companies that sign contracts with the Kurdistan government. The US sees such deals as undermining the power of the central government.

Source / Dow Jones & Company
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