Kurdistan Hunts for Oil: The Kurds create their own rules

by Janet Ritz

Cross-posted on The Huffington Post

The Kurdistan Regional Government (KRG), after passing their own benchmark oil revenue sharing legislation, separate from Baghdad, has just signed their first oil production sharing contract with an outside company:

Texas' Hunt Oil Co. and Kurdistan's regional government said Saturday they've signed a production-sharing contract for petroleum exploration in northern Iraq, the first such deal since the Kurds passed their own oil and gas law in August. Link

According to this press release issued by the KRG, the Hunt Oil Company, working with Impulse Energy Corporation, will start with a geological survey of seismic activity in the Duhok area of Kurdistan, followed by the first exploration well in 2008:

The Kurdistan Regional Government (KRG) together with Hunt Oil Company of the Kurdistan Region, a subsidiary of Hunt Oil Company of Dallas, Texas, and Impulse Energy Corporation (IEC) announced today that they have signed a Production Sharing Contract (PSC) covering petroleum exploration activities in the Duhok area of the Kurdistan Region.

The specifics of the deal were not released, but the existence of the deal, a result of the Kurdish Regional Government's own legislation on oil revenue sharing, is bound to make Baghdad take notice after the KRG spoke out against the al-Maliki government's draft legislation of an oil law in July, 2007. It was this rift that led the KRG to pass their own legislation in August, 2007, legislation now seemingly legitimized by Hunt Oil's Production Sharing Agreement with the KRG.

Which leads to questions about the Bush Administration’s involvement in the deal, given that Ray L. Hunt, the head of Hunt Oil (and one of President Bush’s guests to the May, 2007 State Dinner for Queen Elizabeth II), was appointed to a two two-year terms on President Bush’s Foreign Intelligence Advisory Board, first on October 5, 2001 and again on October 27, 2005 – a board which, according to its webpage, is:

Unique within the government, the PFIAB traditionally has been tasked with providing the President with an independent source of advice on the effectiveness with which the intelligence community is meeting the nation's intelligence needs and the vigor and insight with which the community plans for the future.

Established by Eisenhower in 1956, the PFIAB was formed “as a nonpartisan body offering the President objective, expert advice on the conduct of U.S. foreign intelligence.” The question then becomes, considering the known oil affiliations within the current administration, how objective is that advice and how is information from the board being utilized by its membership?

This is not to say that Hunt Oil itself is an illogical choice for the Kurdish Regional Government in their oil exploration effort. Hunt Oil has been successful in finding oil for regional governments, as evidenced by their similar partnership with Yemen at a time when the rest of the world had assumed that oil had bypassed that country:

In 1981, Hunt Oil Company signed a production sharing agreement with the government of Yemen and began operations. The only active oil company in the region, Hunt discovered a major oil field in 1984. The company subsequently constructed a 423-kilometer (263-mile) pipeline across harsh mountains to the Red Sea, and Yemen joined the ranks of oil exporting countries reaching production levels in excess of 150,000 barrels per day. Large reserves of natural gas, estimated at 10 trillion cubic feet, have also been discovered.

General David Petraeus has described the situation in Iraq, during his testimony before Congress last week, as an “ethno-sectarian competition for power and resources.” He went on to add, during further interviews, that “you can’t win if you don’t play.” But what is the game? If the surge’s purported effort is to buy time for Baghdad to come to a political reconciliation, why has one of Bush’s closest allies, the Hunt Oil Company, gone north to Kurdistan instead of waiting for Baghdad to finalize their own oil revenue sharing law (one of those unmet benchmarks)?

Which leads to the question: What is the newly near-independent Kurdistan’s role in the region as General Petraeus’ “hard lessons” of Iraq unfold? Are they trying their best to survive amidst chaos? Are they securing their alliance with the United States through cooperation with Bush Administration’s corporate allies? Are they turning to an experienced bidder within the oil exploration industry? Are the Kurds hedging against a potential conflict with Turkey, given the presence of the outlawed Turkish Kurdish PKK’s bases on their side of the border, by securing their position as a US ally, since Turkey is a US ally, as well? Are they looking to strengthen their ties to the US as Op-Ed reports of conflict between the Iranian Government and their Kurds, on their eastern border, begin to surface, as well?

Another question: Does this mean that Hunt Oil, Impulse Energy and the other Bush Administration affiliated corporations, as it becomes clear that whatever happens with the ongoing ‘surge’, the Iraqi situation outside of Kurdistan – the resolution of which will require the inclusion of the Sunni factions in the central government and the end of untold amounts of blood feuds that have been initiated by the factional fighting and extreme loss of life -- is not likely to be settled until well after the Bush Administration is voted out of office and, as such, they are cutting their own deals to secure the oil contracts in the one part of Iraq that is not waiting for a central government to resolve their problems?

This is not to imply that the Kurdish Regional Government’s initiative in passing their own oil revenue sharing law was meant to undermine the central government. The Kurds reside in a landlocked region of northern Iraq surrounded by potential enemies and a large population of Kurds that are minorities within those outside governments (Turkey, Iran, Syria). The pressures on the Kurdish Regional Government is likely enormous within the chessboard/hornet’s nest that Iraq has become and their decision to make the Hunt Oil deal while a Bush Administration friendly to them was still in power, along with the possibility that the entire deal was done with, if not the Bush Administration’s blessing, at least their foreknowledge, may have been the only course available to them.

Whether the deal will motivate Baghdad to finalize their own oil and gas revenue sharing law and/or influence world business to see the al-Maliki government as less legitimate is unknown. What is known: The Kurds have provided an opportunity for corporate oil to join the ‘competition for power and resources’ by passing their own revenue sharing law and Texas’ Hunt Oil will now be hunting for Iraqi Kurdistan’s oil in a deal modeled after their own agreement that lead to the establishment of Yemen’s oil and gas industry.

Here's a link to the KRG press release.

To the text of the KRG Oil and Gas Law.

To the Washington Post article on the Hunt/KRG contract.

And more about the Kurds.