Sketchy stories of Kurd-Korean oil deal

Feb. 15, 2008 at 6:35 PM
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SEOUL, Feb. 15 (UPI) -- Media reports from Seoul say Iraq's Kurds have signed deals for oil and other projects with a South Korea consortium, but details are sketchy.

If so, the move would heighten current tensions between the Kurdistan Regional Government and Iraq's central government, and mark a departure from the previous 20 controversial oil deals that were announced with fanfare by the KRG itself.

The Korea Times reports the Korean National Oil Corp. was granted rights to oil fields in the three provinces in Iraq's north that make up the KRG. It also reported a consortium led by Ssangyong Engineering & Construction, Doosan Construction & Engineering and Kukdong Engineering & Construction was awarded a $10.5 billion package to build roads, power plants and other "social infrastructure."

It was announced as KRG Prime Minister Nechirvan Barzani led a delegation to South Korea and held meetings that included with President-elect Lee Myung-bak.

It's not clear whether this is a new deal or just a reaffirmation of an exploration and production-sharing contract announced by KRG Natural Resources Minister Ashti Hawrami in November. A KNOC-led consortium of South Korean companies was awarded that contract. The Korea Times twice mentioned it as a new deal.

The Financial Times, however, reports the deal announced in Seoul Thursday "would give it a foothold" in the KRG's small but highly prospective oil sector. It also reported Barzani and KNOC signed a memorandum of understanding on an oil deal and in exchange South Korea would have to build a $2 billion highway and $10 billion in social infrastructure.

The Kurds control little of Iraq's proven reserves of 115 billion barrels -- the third largest in the world. Iraq is highly underexplored and the KRG has been pressing hard for control over signing such deals -- and soon. Frustrated by stalled negotiations with Baghdad over an oil law that would set guidelines for control as well as foreign investment, the KRG passed its own oil law in August.

Since then, the KRG released a handful of dramatic announcements that it had signed deals for foreign firms to explore for and produce oil in its area.

Iraqi Oil Minister Hussain al-Shahristani has called such deals illegal and threatened to blacklist any such firm from being awarded deals in upcoming bidding rounds for non-KRG projects. The ministry has already cut off two companies from oil purchases: Austria's OMV and SK Energy, South Korea's largest refiner and a partner in the KNOC-led contract with the KRG.

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