[R-G] Canadian companies join rush for Iraq's oil

[Anthony Fenton]

Copyright 2007 The Calgary Herald, a division of Canwest MediaWorks  
Publication Inc.
All Rights Reserved
The Calgary Herald (Alberta)

October 11, 2007 Thursday
Final Edition

SECTION: THE EDITORIAL PAGE; Pg. A16

LENGTH: 834 words

HEADLINE: Canadian companies join rush for Iraq's oil

BYLINE: Harry Sterling, For The Calgary Herald

BODY:


Oil and water do not make for a good mix. But neither do oil and  
politics, especially if it involves violence-plagued Iraq.

However, some foreign petroleum companies, including Canadian, seem  
prepared to ignore such realities in their desire to get in on the  
ground floor in winning contracts to develop the oil industry in  
Iraq's autonomous Kurdistan region in the country's north.

The problem is that despite the fact the central government in  
Baghdad and parliament have failed to reach an agreement with the  
country's provinces on a new petroleum law the Kurdistan Regional  
Government, KRG, has begun signing contracts with foreign oil firms,  
two of them Canadian, under its own Oil and Gas Law passed by the  
Kurdistan national assembly early in August.

Kurdish authorities insist their regional law is consistent with the  
Iraqi constitution which grants considerable powers to provinces to  
govern their own affairs.

The first out of the gate was Hunt Oil Co. of Dallas, Texas, one of  
the largest privately owned independent petroleum companies operating  
on a global basis. It signed a deal with the Kurdistan government in  
Erbil in August, unleashing a storm of controversy with the central  
government in Baghdad.

The federal Oil Minister, Hussain al-Shahristani, a member of the  
Arab Shiite coalition controlling the federal government, denounced  
the deal, calling it "illegal", even suggesting the Kurds' actions  
raised questions concerning their commitment to a united Iraq.

In response, the Kurdistan Regional Government issued a statement  
describing Shahristani's comments as "unacceptable" and But it isn't  
just the federal Iraqi government of Prime Minister Nuri Kamal al- 
Maliki which is unhappy with the Kurdistan deal with Hunt Oil Company.

U.S. President George W. Bush -- who supposedly has close relations  
with the Hunt family, longstanding supporters of the Republican party  
-- claimed he knew nothing about the contract, a deal which many in  
Washington found embarrassing, especially given the importance  
attached to having Baghdad and the provinces reaching an agreement on  
a new oil law which would rejuvenate that critically important  
economic sector. The U.S. State Department issued a statement saying  
it found such regional-based contracts "unhelpful."

None of this has deterred Kurdish authorities in the capital of  
Erbil. In September they announced a deal between the Turkish  
engineering firm Genel Enerji and a Switzerland-based Canadian oil  
company, Addax Petroleum International, to develop Kurdistan's Taq  
Taq field. It's estimated the area could contain as much as two  
billion barrels of oil, valued close to $140 billion at today's oil  
prices.

Earlier this month the Kurdish Ministry of Natural Resources  
announced two further production sharing contracts (PSC's) for gas  
and oil exploration and development.

One of the deals was awarded to Heritage Energy Middle East Ltd., a  
wholly owned subsidiary of Canadian listed oil company Heritage Oil  
and Gas.

Not surprisingly, the recent oil contracts authorized by the  
Kurdistan government have infuriated the federal authorities in  
Baghdad. Some see the deals as a clear indication of Kurdistan's  
attempt to pave the way for eventual independence, a long-time goal  
of the Kurdish population.

However, it's not solely the authorities in Baghdad who're suspicious  
of the Kurdish government's intentions. Turkey is not pleased by such  
developments either.

Considering that Turkey's southeast region has been wracked by an  
insurgency carried out by Turkish Kurds belonging to the Kurdistan  
Workers Party, PKK, since the 1980's -- in which approximately 35,000  
have been killed and entire villages devastated -- the last thing  
Turkey wants to see is an independent Kurdish state right on its  
borders, acting as a beacon for Kurdish separatists.

The fact PKK forces operate from the mountainous region of Kurdistan  
has created growing tension between the government of Prime Minister  
Tayyip Erdogan in Ankara and the government of Prime Minister  
Nechirvan Barzani in Kurdistan and President Jala Talabani in  
Baghdad, himself a Kurd.

Turkey's top generals went so far last summer to publicly state they  
wanted authority to send Turkish forces into Kurdistan. (Following  
the killing of Turkish soldiers by the PKK over last weekend, Erdogan  
reportedly has authorized hot-pursuit operations across the border.)

If the Kurdistan authorities didn't already have enough problems they  
also are now experiencing problems on their border with Iran, the  
latter shelling the Kurdistan border region because of the presence  
there of Kurdish Iranian insurgents, resulting in entire villages  
being abandoned.

Although Kurdistan, unlike much of Iraq, remains relatively stable,  
it's also apparent that major oil companies themselves are adopting a  
wait-and-see attitude towards investing in Kurdish controlled areas,  
leaving it to smaller companies to take on such risks, including  
Canadian ones.

Harry Sterling, a former diplomat, is an Ottawa-based commentator

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