U.S. oil giant signs deal with Iraqi Kurds, defies central authority

U.S. oil giant signs deal with Iraqi Kurds, defies central authority

ISTANBUL - Hürriyet Daily News
U.S. oil giant signs deal with Iraqi Kurds, defies central authority

This file photo shows an oil facility in the Kurdistan region of Iraq. The Kurdistan regional government signed an oil deal with Chevron which will search for oil in six areas. Hürriyet photo

U.S. oil giant Chevron announced July 19 that it had signed a deal with Iraqi Kurds to explore for oil in their northern region, defying the Iraqi central government which itself wants to control the area’s oil wealth. Turkey has also developed energy ties with the Kurdistan Regional Government (KRG), straining its relations with Baghdad

The agreement makes Chevron the second U.S. company to secure oil deals with Kurds in conflict with Baghdad, after Exxon Mobil Corp. agreed last October to search for oil in six areas, the Associated Press reported July 20.

Baghdad wants to manage its energy resources nationwide and have the final say on all oil and gas deals. Kurds argue that the constitution allows them to draw up development plans independently and award deals without going through the oil ministry.

Chevron, based in California, said in a statement it would take over India’s Reliance Exploration and Production efforts to explore for oil in the Rovi and Sarta blocks. Chevron will hold 80 percent of the contract while Austria’s OMV AG will hold the rest. The blocks are located north of the regional capital, Arbil, and cover a combined area of approximately 1,124 square kilometers.

Since the 2003 U.S.-led invasion of Iraq, the country’s Kurds have signed over 50 relatively small deals. But the entry of Exxon Mobil and now Chevron may be a game changer leading to de facto policies that the Kurds have long sought.

Iraq’s post-invasion governments have until recently blacklisted energy companies that signed contracts with the KRG to prevent them from working elsewhere in the country or purchasing crude oil. Chevron has no deals with the Baghdad government.

Later on July 19, Iraqi Prime Minister Nouri al-Maliki’s office said it had received a “positive and convincing” letter from President Barack Obama about Exxon Mobil’s oil plans in the Kurdish region, where Baghdad wants it to cease operations.

Al-Maliki’s statement did not directly quote from the letter, and his office did not provide a copy of it. It called on the company to meet “recommendations of the Iraqi government and the recommendations of the U.S. administration regarding this issue.” The statement also implied that Obama would side with Baghdad on the dispute, saying his letter “stressed respect of the constitution, and Iraqi laws, along the same lines the Iraqi government is working.”

Turkey’s energy deals

Meanwhile, Turkey has inked energy deals with the KRG despite harsh criticism from central Iraqi government officials, in a move to offset decreasing crude and gas flow from Iran due to international sanctions imposed on the Islamic republic.

Siyah Kalem, a Turkish engineering and construction company, has bid to transport natural gas from the Kurdish region, which was recently approved by The Energy Ministry and the Foreign Ministry of Turkey. Ankara and Arbil also admitted the beginning of oil trade in early July, a move conducted by the private sector, Turkish Energy Taner Yıldız said, referring to oil refiner Tüpraş.

“Turkey must stop the unauthorized export of oil through its land,” Iraqi spokesman Ali Dabbagh said July 15. Turkey dismissed demands ceasing transfers of crude oil from the KRG, saying that such trade was legal.

However, Turkey and Baghdad have not refrained from closer ties in energy in these tense political circumstances. Iraq signed an initial deal with a Turkey-Kuwait consortium to drill for oil and natural gas on July 16. Another warm step between the two countries was the disclosure of plans to ship oil from Basra, Iraq’s oil and gas rich southern province to Turkey, via a pipeline.