Kurdistan, Baghdad at odds over oil contracts

The Iraqi Oil Ministry announced that a contract will be signed to develop the Rumaila oil field—the largest in Iraq and one of the largest in the world—with a joint venture formed for the project by BP and the China National Petroleum Corp. (CNPC). Iraq’s Oil Minister Hussain al-Shahristani hailed the awarding of the Rumaila contract as a “great achievement”. (Dow Jones, July 1) A rival bid was placed by a joint venture of Exxon and Malaysia’s Petronas. (Dow Jones, June 30)

But the prime minister of Iraq’s autonomous Kurdish region harshly condemned plans by the Oil Ministry to auction six fields in the June 29-30 tender for service contracts, calling them unconstitutional. “This auction is a violation of Iraq’s federal constitution,” Prime Minister Nechirvan Barzani wrote on the Kurdish Regional Government (KRG) website. “The proposed Oil Ministry contracts are not in the best interest of the Iraqi people.”

Two of the oil fields, Kirkuk and Bai Hassan, are in territory that is disputed between Baghdad and the KRG. The Kurdish leadership say the Oil Ministry has no right to tender these fields until that dispute is resolved. “Any decision related to contracting for Kirkuk and Bai Hassan fields requires the direct involvement of the KRG as a party to the dispute,” Barzani said. “Regrettably, the KRG has not been involved.”

He added that any oil companies who invest in the disputed territories would be considered to have broken Kurdistan’s own oil and gas law. Baghdad has similarly rejected deals the KRG signed with international oil companies. China’s state oil group Sinopec is said to be preparing a bid for its Addax Petroleum Corp. to develop a field in the Kurdish zone. Baghdad has made clear it not recognize the legitimacy of the Addax concession. (Reuters, June 26)

It is uncertain if the Addax is still on now that China’s CNPC is poised to sign a deal with Baghdad to develop Rumaila. Just as the Rumaila deal was announced, Kirkuk was hit with a deadly car bomb attack.

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