ERBIL, Iraq, Aug. 2 (UPI) -- The Iraqi government's oil dispute with the semiautonomous Kurdish enclave reached crisis point Tuesday after French oil giant Total signed an exploration deal with Kurdistan, an act of defiance that could affect Baghdad's ambitious plans to quadruple oil production.
Total follows similar breakaway deals with the Kurdistan Regional Government by U.S. oil titans Exxon Mobil and Chevron. Norway's Statoil is showing interest in joining them.
Kurdistan, three provinces that span northern Iraq and border Turkey, sits on an estimated 45 billion-50 billion barrels of oil plus up to 200 trillion cubic feet of gas. That's a fraction of the 143.1 billion barrels of known reserves and possibly as much again in untapped fields, in Iraq as a whole.
But the difference is that the 15 production contracts Baghdad's Oil Ministry has signed with international companies since 2009 to boost production all involve flat fees of around $1-$2 per barrel produced that the companies signed just to be able to get a crack at Iraq's energy riches, one of the few such prizes left on Earth.
The Kurds offer more generous terms, up to $5 per barrel, under which foreign companies can expect substantial returns on their investment.
Baghdad insists it's the sole authority on oil and gas contracts, even though a much-delayed Oil Bill languishes in Parliament, and that the KRG is acting illegally.
After Exxon Mobil led the way with its bombshell October 2011 deal to explore six Kurdish blocks, Shell expressed interest. But unlike Exxon, the world's most powerful oil company, the Anglo-Dutch major backed off when Baghdad strongly expressed concern because Shell didn't want to jeopardize a possible $17 billion gas deal with the Iraqis.
Then Chevron, the second largest U.S. oil company, announced July 19, it had acquired an 80 percent stake and operational control of two blocks north of Erbil, the Kurdish capital.
Chevron, unfazed by Baghdad's threats of "severe consequences," was swiftly followed by Total, which said it has secured a 35 percent stake in two exploration blocks without Baghdad's consent for $200 million-$300 million.
All this has underlined the extent of foreign oilmen's frustration with Baghdad and could open the door to more Big Oil deals with Kurdistan.
These moves are made more controversial by their political effects.
They add great weight to the Kurds' unstated, but barely concealed, ambition to establish an independent state. Baghdad fears this will encourage other oil-bearing regions, particularly Shiite-controlled Basra province in the south, to seek more autonomy and control over their energy riches, signaling the breakup of a federal Iraq.
Iraqi Kurdistan, lying as it does next to Kurdish regions in Syria, Turkey and Iran, could be the genesis for a homeland for the region's 20 million ethnic Kurds.
Already the landlocked Kurds, who say they'll be able to produce 1 million bpd by 2015, are negotiating with Turkey to build export pipelines to the Mediterranean, bypassing the Iraq's federal export grid.
Baghdad's incensed and brands the plan as "hostile."
None of the surrounding states, like Iraq, want a Kurdish entity in their midst with abundant oil and gas to maintain its independence.
Yet the Kurds are the world's largest ethnic group without a homeland and some say recent events in the region, such as the Syrian revolution, will propel them in that direction.
There are those who see Washington's hand in the way the two biggest U.S. oil companies defied Prime Minister Nouri al-Maliki, a Shiite with close links to Iran, which seeks to dominate its former enemy, and its energy wealth, now that U.S. troops have departed.
These individuals see the oil companies' actions as a way for the United States to retain a strategic foothold in the region, adjacent to Iran.
But the Financial Times observed after Exxon's deal with the KRG: "Contrary to conventional wisdom, Washington appears to have been left in the dark about the deal, which many executives believe could have profound ramifications for the global oil market.
"The International Energy Agency forecast Iraq would be the single most important source of new production between now and 2035, making the development of the country's energy industry critical for international oil markets.
"The U.S. State Department has made clear that it knew nothing about the deal and that it does not like it."
Chevron's deal opens that hypothesis once again.