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Leap of faith—Kurdistan foreign oil deals could ignite power shift in Iraq

Leap of faith—Kurdistan foreign oil deals could ignite power shift in Iraq

Eager to grow, smaller foreign oil firms sign deals with Kurdistan despite the semi-autonomous region’s prolonged deadlock with Iraq, which refuses to recognise any Kurdish deals.

August 9, 2011 11:39 by

…differences between Iraq’s central government and Kurdistan over revenue-sharing.

Gulf Keystone chief financial officer Ewen Ainsworth said he was encouraged by parliamentary debate on the oil law, which he called “significant progress”.

Even without the firmer guarantee of a new oil law, the Kurdistan-focused explorer said it considered the KRG contracts legal.

“The stumbling block is more a political stumbling block, rather than a factual, legal stumbling block,” Ainsworth said.

Iraq’s parliament last month warned the government it would force through a new draft of the much-delayed oil law, if the cabinet further held up the original legislation.

Payments in May to foreign oil firms for exploration and extraction costs have been based on an interim agreement.

Iraq’s Deputy Finance Minister Fadhil Nabi said KRG authorities received $234 million as a first loan to pay foreign firms on condition they submitted all receipts and details of exploration costs.

“Kurdish authorities must submit receipts of foreign firms costs so a second payment could be made and that has not happened yet,” Mahdi said.

Still, the payments already made could be incentive enough for other oil firms to take the calculated risk of moving into the region.

“Oil majors have managed to access the largest oilfields in southern Iraq,” said Nazar Mahdi, an expert with Iraqi Oil Ministry. “Small companies seeking deals in Kurdistan may feel getting in at the start improves their long-term prospects.” (By Sarah Young and Ahmed Rasheed; Additional reporting by Barbara Lewis in London; Editing by Anthony Barker)

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