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IRAQ - Kurds To Raise Oil E&P Operations.

The Kurdistan Regional Government (KRG) wants to raise from five to 15 the number of international oil companies (IOCs) operating in its region by end-2007 regardless of whether Iraq's parliament passes the petroleum law. The FT on March 23 quoted Kurdish Energy Minister Ashti Hawrami as saying Kurdistan would become a hub for IOCs ready to invest in the rest of Iraq because of security concerns, adding: "We are in discussions with a number of other companies. It is more likely that the contractors will come [to Kurdistan] to start with and set up a base to hopefully then invest in the rest of Iraq". He said he saw no reason why the petroleum law should not pass parliament by the end-May, the target date.

Ashti said the KRG will still share any revenue it makes from the oil sales with the rest of the country even if the law is not yet in place, adding: "Even if things don't go ahead, we will still share it. If things go completely wrong we will rethink it". He said the negotiations of the draft petroleum law had accelerated the interest of IOCs, several of which had already completed contracts ready to sign. He declined to name the companies, but interested parties are believed to include OMV of Austria, and Marathon and Anadarko of the US.

Ashti said: "It is 15 [contractors] we want to end up with. If we get another 10, I'll be very happy with myself. We need to keep the momentum going".

It is unclear how Baghdad will react to Kurdistan's ambitions. Baghdad has in the past objected to Kurdish contracts, but is also likely to be careful not to upset negotiation of the petroleum law.

Kurdistan wants to produce 200,000 b/d of crude oil by end-2008 and ramp up to 1m b/d within five years. The northern region is thought to hold 25 bn barrels of oil reserves, with another 20 bn lying in the disputed areas of Kirkuk. But Kurdistan has to find a way to export its crude oil before it is able to realise its goals. The Kirkuk pipeline, the main northern artery, has been sabotaged so often that it is all but useless.

DNO, the Norwegian oil company which has signed one of the five existing contracts with the KRG, expects to produce the first new crude oil out of Kurdistan, and for that matter Iraq, in May. It has provisions to truck as much as 10,000 b/d, but even 20,000-25,000 b/d would be possible, though logistically difficult and about 10 times more expensive than moving the crude oil by pipeline.
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Publication:APS Diplomat Strategic Balance in the Middle East
Date:Mar 26, 2007
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