Thursday, October 28, 2010

Kurdistan Signs New Oil Deal With U.S. Firm

Irbil Province Where Marathon Will Be Working
Source: Wikimedia
On October 21, 2010 the Kurdistan Regional Government’s (KRG) Natural Resource Ministry announced that it had signed its latest deal with a foreign company to develop its oil industry. The Houston-based Marathon corporation won the rights to four fields in Irbil province. Marathon will get 80% and the KRG 20% in a joint venture for the Harir and Safen fields, and 45% interests in consortiums with other foreign firms and the KRG in the Sarsang and Atrush fields. Marathon is the fourth largest combined oil company, and fifth largest refiner in the United States.

The terms agreed upon are like others the Natural Resource Ministry has offered for petroleum development with Marathon getting a 20 year production sharing contract with an option to extend it for another five years. Production sharing agreements allow the companies to claim the fields’ reserves on their own books and share in the profits. Those types of contracts are common when looking for new oil finds such as in Kurdistan because the work can be costly and the returns low. 

Marathon signed under the KRG’s 2007 oil law, which Baghdad does not recognize. An adviser to the Resource Ministry said that the Oil Ministry has always objected to their deals, but they don’t care because they have their own petroleum legislation. The KRG has been inking contracts with foreign petroleum companies since 2003. It claims that it has the right to develop its own resources independently of the central government. That has been hotly disputed by the Oil Ministry, especially under current Minister Hussein Shahristani who has called all of the Kurdish contracts illegal. The central government has also banned any company working in the region from signing deals for the much larger southern oil fields. That has been enough to deter major corporations from signing with the Kurds. Marathon is the first exception. Overall, the KRG is estimated to have around 13% of Iraq’s proven reserves. Only two fields, Tawke and Taq Taq, actually produce petroleum today. Marathon may be hoping that the central and regional governments will come to some type of agreement over oil in the new regime that will make their deal worthwhile. The Kurdish parties have made recognition of their petroleum contracts a major demand in their negotiations over joining any ruling coalition.

Foreign Oil Firms Operating In Kurdistan
2003-2010
A&T Petroleum, Turkey
Addax Petroleum, Canada/Switzerland
Aspect Energy, U.S.
Crescent Petroleum, UAE
Dana Gas, UAE
DNO, Norway
Genel Enerji, Turkey
Groundstar Resources, Canada
Gulf Keystone Petroleum, U.K.
Heritage Oil and Gas, Canada
Hillwood International Energy, U.S.
Hunt Oil, U.S.
Kalegran/MOL, Hungary
Korea National Oil Corporation, South Korea
Marathon, U.S.
Niko Resources, Canada
Norbest, Russia
Oil Search, Australian
OMV Petroleum Exploration, Austria
Perenco, France
Pet Oil, Turkey
Prime Natural Resources, U.S.
Reliance Energy, India
Sinopec, China 
Sterling Energy International, U.S.
Talisman Energy, Canada
Texas Keystone, U.S.
Vast Exploration, Canada
Western Zagros, Canada

SOURCES

International Crisis Group, “Iraq After The Surge II: The Need for a New Political Strategy,” 4/30/08
- “Oil For Soil: Toward A Grand Bargain On Iraq And The Kurds,” 10/28/08

Saifaddin, Dilshad, “Kurdistan signed four new deals for oil production,” AK News, 10/22/10

UPI, “Marathon land first oil deals in Iraq,” 10/21/10

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