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ERBIL, Iraq, June 25 (UPI) -- It could be the new age for wildcatters, or just the new age of Iraqi oil development, but the monthly gathering of operators in Iraq's Kurdistan region is an optimistic party despite above-ground challenges that eclipse those subsoil. None of the current Kurdistan region was developed under Saddam Hussein, but, like the rest of Iraq, below the hills and mountains of the north sit prime prospects.
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Two of the dozens of projects -- the first new exploration and development in Iraq since 2003 -- are already selling oil domestically. It will be exported -- a million barrels per day by 2013, the regional oil minister says -- but await a resolution between Iraq's federal government and the Kurdistan Regional Government.
While the KRG and Baghdad negotiate, including over the draft oil law and the status of disputed territories, the Kurdistan Region Petroleum Operators Forum meet once a month in a business meeting turned social hour inside "The Sheraton," the former chain hotel now called the Erbil International.
Dozens of company officials sit around a horseshoe of tables and update each other on their projects' progress. They exchange tips on the evolving dos and don'ts of operating in northern Iraq and coordinate the joint purchase of services.
At a recent meeting the group was courted by companies pitching oil industry charter flights, Internet services and a range of products directly and indirectly related to the oil sector.
Each assembly is hosted by a company on a rotating basis, which provides the post-business gathering happy hour and buffet dinner.
"Working conditions are both better and more complicated than in other regions of the world," said Peter Seifert, general manager of PETEX, a subsidiary of Austria's OMV.
The companies say although there have been no oil sector attacks, they still must operate as in a war zone. And they're confident disputes between the governments will be overcome and their contracts accepted by Baghdad.
"The majority of the issues we are dealing with are above ground -- the resolution of the Federal Oil & Gas Law, transportation, logistics, to name a few," said Simon Hatfield, president of WesternZagros. "We are optimistic that the issues between the KRG and the central government will be resolved, as both parties are actively involved in seeking a resolution."
The two sides are currently meeting in Baghdad.
The KRG has signed more than 20 production sharing contracts with international oil firms since 2004 -- and counting:
The KRG announced Wednesday the Korea National Oil Corp. was awarded the controlling stake in two new PSCs and a share of two existing PSCs. The company also headed a consortium awarded a PSC last November. On Monday the KRG announced Canada's Talisman was brought into an existing PSC and given a contract to conduct seismic testing with a PSC option.
"We're always talking to people," said KRG Minister of Natural Resources Ashti Hawrami. "That process is always going on. Never stops."
Austria's OMV and a partner in the November KNOC consortium, however, were shown the consequence of crossing Baghdad. Minister of Oil Hussain al-Shahristani has cut oil sales to them, and said any company that signs with the Kurds will lose a chance at the rest of Iraq. None of the KRG-signed companies made it on the list of 35 companies prequalified to bid for oil deals to be offered for tender by the ministry later this year.
Shahristani also said only the deals signed by the KRG before a February 2007 version of the oil law was tentatively agreed to would be considered valid by Baghdad, and only after being reviewed and amended. Norwegian firm DNO and TTOPCO, the joint venture between Turkey's Genel Enerji and Canada's Addax, are among the few that are safe. Both are selling oil to domestic refiners. DNO production reached more than 11,600 barrels per day last month, according to its May report, and the company is ready to crank it up for exports.
But if any of the post-February 2007 projects begin to flow, the federal government will act, Shahristani warned.
"That oil will be confiscated; they have no right to work in that part of the country," he said. "We'll use a number of measures to stop any violation of Iraq law. Those contracts have no standing with us, we don't recognize them and they have no right to do that."
He's leading the federal government push to ensure the Iraqi oil strategy is governed from the center, citing the 2005 Constitution.
Hawrami, also, claims the Constitution backs his oil deals and insists if the money is being sent to and redistributed from the central government, it shouldn't matter whether local governments sign oil deals.
While the oil law is intended to delineate the oil rights of the various governments -- as well as the new role of international oil companies in the previously nationalized oil sector -- the issue of disputed territories is at play as well.
The most famous of the territories, which were gerrymandered and ethnically cleansed by Saddam Hussein, is Kirkuk, the oil-rich area which is officially outside the KRG but claimed by the Kurds as rightfully theirs.
Just south of DNO's northernmost project is land awarded for exploration and development to Dallas-based Hunt Oil. The most prolific of the handful of U.S. firms that signed with the KRG, the deal was controversial in Washington. The owner, Ray Hunt, is a political appointee of and top fundraiser for President Bush. The State Department is being accused of not doing enough to prevent the deal. And numerous members of Congress have started investigating it, including Sen. Carl Levin, D-Mich., who sent a letter this month to national security adviser Stephen Hadley asking the administration to pressure Hunt and other U.S. firms to back out of their deal.
Here in Erbil, however, the KRG is being accused of signing contracts for land in the disputed territories, with Hunt being the most prominent.
"They have no right to be there," said Shahristani.
Hawrami says all deals are within areas that are under KRG administrative control.
"We believe that our agreement with the KRG is entirely legal within the framework of both the KRG and the Iraqi constitution," said Hunt Senior Vice President for Corporate Affairs and International Relations Jeanne Phillips.
Despite the dispute, the operators forum is an upbeat function. DNO will soon announce another discovery. WesternZagros, a former subsidiary spun off from Marathon, which afterward made it to the Baghdad bidding list, spudded its first well last month.
"A couple other companies are just about to complete their negotiations on their rigs to start the drilling," Hawrami said, with the rest producing or exploring and testing.
"Maybe they are not all entirely progressing to the same speed, but they are really just getting on with it, fast track," he said. "Everybody's busy getting seismic crews organized and sourcing rigs to drill the first exploration wells. There's a lot going on."
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(Ben Lando also reported this story from Baghdad and Washington, D.C.)
