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Kurds complicate Iraqi oil contracts

Marketplace Staff Jun 30, 2009
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Kurds complicate Iraqi oil contracts

Marketplace Staff Jun 30, 2009
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TEXT OF STORY

Bob Moon: Iraq’s emerging government is trying to auction off eight giant oil and gas fields today, but the bidding is off to a shaky start. That could signal trouble for the country’s reconstruction hopes. Iraq has the world’s third largest proven reserves of oil. But the country’s uncertain future is complicating matters. The autonomous northern region of Kurdistan has already made deals with foreign oil companies and is shipping oil to international markets. Reese Erlich reports.


REESE ERLICH: Dozens of trucks line up here at the Tak Tak oil field in Kurdistan. They’ll carry the oil to a pipeline that will then pump it to Turkey. Kurdish officials have signed more than 30 contracts with foreign oil companies. Both sides share production costs and profits. But the Baghdad Oil Ministry calls those contracts illegal because they weren’t approved by the country’s central government.

Baghdad says all oil profits will go to the central government. The Kurdish Regional Government then gets just 17 percent, its share of the national budget. Any production costs will not be borne by Baghdad. Kurdish government official Govand Sherwani says Baghdad’s refusal to recognize these contracts between Kurds and foreign oil companies is absurd.

GOVAND SHERWANI: How can you accept the money from the oil but not accept the contract on which it was drilled and exported?

But some other Kurds criticize the contracts because they provide too much profit for the foreign oil corporations. And Mohammad Tofiq, a leader of an opposition political group, says the Kurdish Regional Government should concentrate on other kinds of economic development.

Mohammada Tofiq: Reviving agriculture is important. Building small industries related to agriculture and livestock, like dairies, is important. Everywhere you have oil you have backward mentality and culture.

Meanwhile, 100,000 barrels of oil flow from Kurdistan to international markets every day. Analysts say the regional government will likely pay the foreign oil companies’ production costs and then seek reimbursement from Baghdad. Negotiations between Kurdish and central government officials are continuing.

At the Tak Tak oil field, Kurdistan, Iraq, I’m Reese Erlich for Marketplace.

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