Erbil // The Kurdish region in northern Iraq has been hailed as one of the last frontier oil territories, but it has recently begun to lose some its allure as the dispute over energy autonomy between Baghdad and Erbil rumbles on.
International oil companies (IOCs) are continuing to pile into Kurdistan, lured by good prospects and favourable contracts. However, established producers are tiring of the endless uncertainty over payments for their hydrocarbons.
On Sunday, the Iraqi central government released about US$540 million (Dh1.98bn) to IOCs operating Kurdish assets, bringing relief to the small and mid-sized companies that must cope with the funding shortfall.
The Kurdistan Regional Government (KRG) and Iraq's federal government hammered out an agreement in September, a development that was greeted enthusiastically by the industry. But the optimism was tempered by past experience.
"I was sceptical because I have seen agreements like that before, and unfortunately, almost as soon as the ink was dry, there was slipping," said Majid Jafar, the chief executive of Sharjah-based Crescent Petroleum, the parent company of Dana Gas, which produces gas and condensate in Kurdistan.
Optimism will fade further if a second payment worth $290m, promised by Baghdad in September, is not made.
Erbil and Baghdad have been locked in a dispute over Kurdish ambitions to grow its hydrocarbon sector for many years.
Disagreements over the contracts handed to IOCs have prevented the adoption of an oil and gas law that would lead a regular flow of funds to producers.
The central government insists that the production-sharing agreements signed by the KRG and the oil companies are illegal, while Erbil maintains it has the right to enter into contracts under Iraq's constitution.
At the heart of the dispute lie Baghdad's concerns that Kurdish autonomy over the abundant hydrocarbon resources of the region would lead to a breakaway from Iraq.
Secession from a country that not long ago poured poison gas into the remote mountainous region is already a tempting prospect for many Kurds, who miss out on few opportunities to remind foreigners about the acts of genocide committed against them by Iraq's late dictator Saddam Hussein.
Baghdad is doing its best to undermine the KRG's contracts by paying companies in the region only the cost of production, and only intermittently at best.
The capital also blacklists producers active in the KRG from work in the rest of Iraq.
Regardless of this threat, even the biggest fish have entered Kurdistan in search of a smaller pond.
ExxonMobil, Total and Chevron, three of the five biggest IOCs, have all committed themselves to production in Kurdistan, risking or forgoing operations in the country's south.
After signing a production-sharing agreement with Erbil last year, Exxon responded to Baghdad's pressure by putting up for sale its share in the West Qurna-1 supermajor field near Basra in the south. Unfavourable terms under the technical service contracts offered by Baghdad are providing little incentive to stay.
Having made their bed, companies are determined to lie in it, and to believe in a positive outcome.
"We expect we will do good business here for a long time to come," said Bijan Mossavar-Rahmani, the executive chairman of DNO, a Norwegian company that has merged with the UAE's RAK Petroleum.
"I believe that the political divisions will be resolved as production grows and more companies come to the region," said Mr Mossavar-Rahmani, who thinks that more payments will be released.
Negotiations over the next round of payments are continuing. But companies have been shocked by paltry sum the central government suggested be released to Kurdistan's producers under next year's budget.
fneuhof@thenational.ae
Correction (December 6, 2012): In "Oil frontier in Iraq loses its allure" (Business, page 5; December 6), we incorrectly stated that Iraq's central government had released $1 billion to IOCs operating Kurdish assets. The correct figure is $540 million, which has been corrected above. This article has also been modified to reflect the fact that a second payment worth $290m has been promised by Baghdad. It was also stated that DNO is a Danish company, when it is in fact Norwegian. This has been corrected.
In numbers: PKK’s money network in Europe
Germany: PKK collectors typically bring in $18 million in cash a year – amount has trebled since 2010
Revolutionary tax: Investigators say about $2 million a year raised from ‘tax collection’ around Marseille
Extortion: Gunman convicted in 2023 of demanding $10,000 from Kurdish businessman in Stockholm
Drug trade: PKK income claimed by Turkish anti-drugs force in 2024 to be as high as $500 million a year
Denmark: PKK one of two terrorist groups along with Iranian separatists ASMLA to raise “two-digit million amounts”
Contributions: Hundreds of euros expected from typical Kurdish families and thousands from business owners
TV channel: Kurdish Roj TV accounts frozen and went bankrupt after Denmark fined it more than $1 million over PKK links in 2013
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if you go
The flights
Flydubai flies to Podgorica or nearby Tivat via Sarajevo from Dh2,155 return including taxes. Turkish Airlines flies from Abu Dhabi and Dubai to Podgorica via Istanbul; alternatively, fly with Flydubai from Dubai to Belgrade and take a short flight with Montenegro Air to Podgorica. Etihad flies from Abu Dhabi to Podgorica via Belgrade. Flights cost from about Dh3,000 return including taxes. There are buses from Podgorica to Plav.
The tour
While you can apply for a permit for the route yourself, it’s best to travel with an agency that will arrange it for you. These include Zbulo in Albania (www.zbulo.org) or Zalaz in Montenegro (www.zalaz.me).
The National's picks
4.35pm: Tilal Al Khalediah
5.10pm: Continous
5.45pm: Raging Torrent
6.20pm: West Acre
7pm: Flood Zone
7.40pm: Straight No Chaser
8.15pm: Romantic Warrior
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Date started: 2012
Founder: Amir Barsoum
Based: Dubai, UAE
Sector: HealthTech / MedTech
Size: 300 employees
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Smishing: The SMS equivalent of phishing. Fraudsters falsify the telephone number through “text spoofing,” so that it appears to be a genuine text from the bank.
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Identity theft: Someone illegally obtains your confidential information, through various ways, such as theft of your wallet, bank and utility bill statements, computer intrusion and social networks.
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Director: Basel Adra, Yuval Abraham, Rachel Szor, Hamdan Ballal
Stars: Basel Adra, Yuval Abraham
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Living in...
This article is part of a guide on where to live in the UAE. Our reporters will profile some of the country’s most desirable districts, provide an estimate of rental prices and introduce you to some of the residents who call each area home.
The specs: 2018 Infiniti QX80
Price: base / as tested: Dh335,000
Engine: 5.6-litre V8
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Power: 400hp @ 5,800rpm
Torque: 560Nm @ 4,000rpm
Fuel economy, combined: 12.1L / 100km
The rules on fostering in the UAE
A foster couple or family must:
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- not be younger than 25 years old
- not have been convicted of offences or crimes involving moral turpitude
- be free of infectious diseases or psychological and mental disorders
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- A single, divorced or widowed Muslim Emirati female, residing in the UAE may apply to foster a child if she is at least 30 years old and able to support the child financially
