The South Korean state-run Korea National Oil Corp. secured the exploration rights for eight oil fields in northern Iraqi Kurdistan.
The deal gives KNOC the right to explore the second-largest oil deposits in the world.
The Kurdistan Regional Government on June 21 signed a deal to give Seoul the rights to about 1.9 billion barrels of crude oil, or enough to meet Korean energy needs for the next two years, the Emirates News Agency WAM reported.
Korea expects to spend around $100 million for the initial exploratory drillings, but Seoul forecasts a near-3 percent boost in energy self-sufficiency to 7 percent, officials said.
The state-run energy firm signed additional deals with the KRG to construct roadways as well as electrical and water facilities in the region as part of a February memorandum of understanding between the two governments.
Kurdish Prime Minister Nechirvan Barzani said he plans to meet with officials in Baghdad to secure the Korean energy deal.
Canada's Talisman Energy signed Kurdish oil and gas deals
Subsidiaries of the Canadian firm Talisman Energy signed oil deals with Iraq's Kurdish government to produce oil and gas in the northern Iraqi provinces.
Talisman said it and the Marathon subsidiary WesternZagros Ltd. reached a deal with the Kurdistan Regional Government to develop two underground reservoirs in Sulaymaniyah province.
Officials with the Calgary-based Talisman said it will spend at least $90 million to cover past costs and secure commitments for three wells in addition to the development of Sulaymaniyah's K39 block in Iraqi Kurdistan.
"Talisman is a company which brings great global experience and a world-class commitment to the communities in the countries in which they invest. We look forward to working together," said a statement by KRG Natural Resources Minister Ashti Hawrami.
The moves stoke an already developing dispute between the KRG and Baghdad. The Iraqi Oil Ministry says the deals are illegal because only the Iraqi federal government has the right to sign oil contracts. Ministry officials said they would confiscate any oil produced through the deal, United Press International reported.
The KRG, however, says it has the unilateral authority to make decisions regarding the development of natural resources in its region, despite opposition from Baghdad.
Iraqi oil production is up to 2.5 million barrels per day, with May averages showing over 2 million barrels per day reached the global market.
Kurdish energy deals stoke diplomatic dispute
The oil deals brokered between South Korean and Canadian energy firms and the Kurdish government weigh on regional relations, officials say.
The Kurdistan Regional Government signed deals with the state-run Korea National Oil Corp. and the Canadian energy firm Talisman to exploit oil and gas reserves in the northern Iraqi provinces. The KRG has signed at least 20 such agreements with 15 various companies since the U.S.-led invasion of Iraq in 2003.
Analysts say the deals and negotiations surrounding oil revenue sharing laws in Iraq have a direct impact not only between the KRG and Baghdad, but with Turkey as well, Today's Zaman said.
Turkey has made moves recently to improve its relationship with Iraqi Kurdistan under the cloud of a Turkish offensive against the separatist Kurdistan Workers' Party, or PKK. Though many countries, including the United States, consider the PKK a terrorist entity, Kurdish officials have made no formal declaration.
The energy moves by the KRG also undermine the potential for securing normal diplomatic relations between Turkey, Kurdistan and the Iraqi central government.
"What matters for us is the implementation on the issue by the central government. Agreements that are not accepted as legitimate by the central government cannot be accepted as legitimate by the international community, and thus by us as well," Iraqi government officials said on condition of anonymity.
Turkish analysts note, however, that most of the major players in the energy market, such as Chevron and ExxonMobil, remain on the sidelines waiting for the Iraqi hydrocarbon laws to move forward.
Several second-tier energy firms from North America and Europe are currently operating in Iraq, as is the Turkish energy firm Genel Enerji.
Iraq is one of the most energy-rich countries in the world, with an estimated 115 billion barrels of oil and roughly 112 trillion cubic feet of natural gas reserves.
Royal Dutch Shell eyeing Iraqi pipeline projects
Royal Dutch Shell is vying for access to the oil and gas sectors in Iraq as a means to expand its export options in the Middle East and Europe.
John Mills, executive vice president of the firm's gas and power sector, said pipeline projects in the region would be an alternative to the high cost of liquefying natural gas and shipping it through tankers in the Persian Gulf that are susceptible to sabotage, the Abu Dhabi daily The National reported.
"The Middle East, which holds 40 percent of the world's gas resources, is likely to play a role in filling the European gas supply gap," Mills said.
He said the Anglo-Dutch energy firm was in talks with the Iraqi and Syrian governments to develop gas plans. Shell entered into talks with Iraq for service contracts that could help bring an additional 24 percent of Iraqi crude to the market.