Earlier the better in Iraq KRG oil deals

WASHINGTON, Oct. 3 (UPI) -- Oil firms eying the Iraqi Kurdish region are likely to get the best exploration blocks the earlier they sign deals, according to a leading industry expert.

The Kurdistan Regional Government announced Tuesday it had approved four production-sharing contracts and signed two of them with foreign, independent oil firms. The other two are to be signed soon, a KRG statement said.

“We anticipate more partnerships as companies who have been studying the area for a while make their move,” said Bob Fryklund, vice president of industry relations for the global energy consultants IHS.

This comes less than a month after signing a deal with Dallas-based Hunt Oil, the first Iraq oil contract with a U.S. company since the war and the first KRG deal since it approved its own regional oil law the month prior.

This put it at odds with the federal Iraqi government, which is at a political impasse on a national hydrocarbons law. The federal government has criticized the recent moves, as well as the handful of contracts the KRG signed over the past two years. The Oil Ministry calls all but the first four illegal.

Iraq has the largest pool of proven oil reserves aside from Saudi Arabia and Iran, and expectations of up to twice as much in potential reserves once the country is fully explored.

All of the global oil firms want in on Iraq’s sector, though a decision as to the extent of denationalization of the sector has not been agreed upon. That, along with the roles of the federal/regional/provincial governments is holding up the national law.

While the world’s largest oil firms are waiting on Baghdad, since nearly all of the proven and most of the probable reserves are located outside the KRG, smaller, independent companies are courting the northern region.

The deals announced Tuesday, with a subsidiary of the Canadian firm Heritage Oil and Gas and a subsidiary of the French firm Perenco S.A., are just the latest.

“The independents are focused on KRG, while the majors are focused on the existing major fields in the south and central Iraq,” Fryklund said. “Thus, continued signature of new blocks in the north by companies like Perenco and Heritage is not unexpected.

“The independents are looking for a foothold in high potential exploration plays and most know that in plays which are immature the first companies usually get the better position. ... Big fields are found by the first in,” Fryklund said.

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Ben Lando, UPI Energy Editor