Kurds challenge Baghdad over oil-exploration rights

IRBIL, Iraq — The Kurdish government has begun drilling for oil at a new field near the northern city of Dohuk, a direct challenge to Baghdad’s control over the nation’s resources.

Many Kurdish sources are reluctant to talk about the exploration near Dohuk and at two other sites, where security is tight and access by visitors restricted.

But Per Thorsdalen, a member of the advance party for a Norwegian firm involved in oil operations, confirmed the fields’ existence and locations. Norwegian oil company DNO is the main contractor for the Dohuk operation.

Published reports indicate Kurdistan’s oil fields are smaller than those in southern Iraq and near the contested city of Kirkuk.

The regional government claims that its oil reserves total 45 billion barrels, versus 200 billion for all of Iraq, but this figure derives from outmoded methods of estimating field size. The true size of Kurdistan’s reserves could be much lower or much higher.

Still, Kurdish officials are optimistic that the region’s oil will prove a major source of income.

“Kurdistan is rich in oil,” said Adnan Mufti, speaker of the Kurdistan regional assembly. He described the Dohuk field as “only a jump-start.”

Regional financing has long been a challenge in Kurdistan. In 1994, a dispute over finances between the two dominant Kurdish political parties sparked a four-year civil war that killed thousands.

Oil revenue could head off another such conflict and solidify the parties’ current alliance. Since the U.S.-led invasion of Iraq in March 2003, Kurdistan has been free of much of the violence that has beset Sunni- and Shi’ite-dominated areas.

But there are political obstacles to the regional government’s oil ambitions, most notably Baghdad’s reluctance to surrender control over any of Iraq’s natural resources.

All major industries in Iraq are owned by the state. The central government in Baghdad doles out revenue to provincial governments and to Kurdistan’s regional government. But Kurdistan’s autonomy, the result of a successful uprising in the wake of the 1991 Persian Gulf War, complicates revenue sharing.

“Any contract for exploration or production of oil and gas without the consent of the federal ministry of oil is contractually void,” Hussain al-Shahristani, deputy speaker of the national assembly, told Dow Jones Newswires in December.

Mr. Mufti contests that assertion. “The [new] constitution is allowing the region to produce its own oil,” he said.

But specific legislation to facilitate independent oil production is pending, and Mr. Mufti is impatient for progress. “This should be regulated by law,” he said.

The oil fight is only one battle in a broad campaign by the Kurdistan government to gradually increase its independence. At the heart of the campaign is the regional government’s claim on the oil-rich city of Kirkuk, which lies just south of Kurdistan’s de facto border.

Story Continues →