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Kurds refuse to allow oil fields to lie fallow

Northern Iraq presses ahead with deals.

By SUSAN TAYLOR MARTIN, Times Staff Writer
Published August 13, 2007

Drilling rig at the Taq Taq oil fields at dawn. The field is located near the town of Koya, and is about 50 miles east of Irbil and 74 miles northwest of Sulaimaniyah.
	[Special to the Times]

SULAIMANIYAH, Iraq - It's 10 a.m., the temperature is 107 degrees and Ahmad Ramses is getting hotter by the minute. And not just because of the weather.

"We have no idea when the pumps will open," he says, angrily gesturing at two ancient gasoline pumps that he and hundreds of other drivers have been watching since midnight.

"Sometimes we wait too long and get nothing."

Iraq has more oil than most places on earth, but motorists still sit in mile-long lines to buy rationed amounts of gas, often of poor quality. The reasons are many: a shortage of refineries, sabotage of pipelines, corruption and smuggling. And the failure to pass an oil law.

For months, the Iraqi Parliament has wrangled over a package of laws that would govern the development of Iraq's oil industry and determine a basis for dividing oil revenues among Iraq's three largest groups: Kurds, Shiites and Sunnis.

Although the Iraqi Cabinet approved draft legislation in June, Kurds and Sunnis have rejected it as giving too much power to a yet-to-be-established national oil company. Kurds want greater control over their own fields - not surprising since they could be some of the richest in the world.

"It's very high quality," expert Leslie Blair says of the Kurdish oil found so far. "You can almost put it in your car."

The Kurdistan Regional Government passed its own oil law last week, though it had already signed agreements with several foreign oil companies. Among them is TTOPCO, a joint venture between a Turkish conglomerate and Canada's Addax Petroleum that began work in 2005 at the Taq Taq field 75 miles northwest of Sulaimaniyah.

"It's a big deal," says Blair, TTOPCO's general manager. "Today there are very few countries you can actually get access to. Venezuela has shut down, Russia has shut down."

Millions at stake

The risks are great, but so are the potential rewards.

The Iraqi government estimates that the three Kurdish provinces in the north contain 25-billion barrels of oil. That's double the amount thought to be in Mexico, the world's 11th-biggest oil producer.

No one knows how much oil is in the Taq Taq field, located in a remote area accessible only by a teeth-rattling gravel road. The field was discovered in 1965 but was never fully explored during Saddam Hussein's era "because there was so much oil in the south that was easy to get to," Blair says.

The southern oil, though, is of cruder quality and is in what has become a far more dangerous part of Iraq.

Since 2005, Blair's team has drilled several wells at Taq Taq that are producing about 2,000 barrels a day. The oil is trucked to a small refinery in Sulaimaniyah that can refine 25,000 barrels daily - enough to ease fuel shortages for at least part of the Kurdish region.

It is costing $1-billion to develop the field, and TTOPCO may spend another $750-million to build a pipeline that would carry oil to ports in Turkey. The existing pipeline, which runs from the oil-rich but violent city of Kirkuk, is frequently blown up by insurgents.

Despite Iraq's vast potential, Exxon Mobil, BP and other major companies have steered clear of signing contracts in the absence of a national oil law that would protect their interests.

"You have to work under a rule of law," Blair says. "Companies like us have taken a huge risk and some of the larger ones can't take that risk. We're not making any money - it's all outgoing."

It's uncertain if the Kurdish contracts would still be valid if Iraq's Parliament passes national oil legislation by September, one of the Bush administration's benchmarks of progress. But if the contracts stand, they could be enormously lucrative for TTOPCO and other foreign firms drilling in Kurdish areas. They will get a percentage of the revenues.

Iraqis and war critics have long suspected that the real reason for the 2003 U.S.-led invasion was to open the country's oil fields to American and foreign firms. A recent poll found that 63 percent of Kurds and other Iraqis would prefer to see their oil developed by state-owned companies.

But the Kurdish government, which has agreed to share its oil wealth with the rest of Iraq, has decided private investment is the best and fastest way to start making money to pay for other critical needs.

"Large parts of the economy are not open to private investment - schools, highways, airports - and that's where the government should be spending its money," Blair says. "It could be $100-billion just to rebuild Kurdistan. Yes, they could develop their oil fields themselves, but it would take a much longer time."

Susan Taylor Martin can be contacted at susan@sptimes.com

[Last modified August 13, 2007, 00:11:26]