US Warns Oil Firms Against Signing
Kurdish Contacts

Nov. 29, 07
By Kostis Geropoulos
www.neurope.eu

The US State Department on November 29 warned American and European companies against signing contracts with Iraq's Kurdish Regional Government (KRG) before the Iraqi government passes a new hydrocarbon framework law.

"The State Department's primary concern here is supporting the government of Iraq's progress on the new hydrocarbons framework law. That's our primary concern and we are continuing to advise companies that there will be significant risk -- legal risk and political risk -- for them to sign contracts in the region ahead of the passage of a federal law that lays out hydrocarbons framework in Iraq," US State Department spokesman Rob McInturff told New Europe telephonically from Washington.

The Kurdish region has been signing contracts ahead of a parliamentary debate over the controversial draft oil and gas law. A number of midsize European and American companies have signed contracts with the Kurdish region hoping to get in line ahead of others.

Hungary's MOL is one of a range of companies, including Austria's OMV, which concluded deals with the KRG at the start of November. MOL spokeswoman Catalina Roman told New Europe the contracts are within the legal frame. "I talked to my colleagues that took care of the contracts with the lawyers and just they consider them to be in the legal frame and this is it," she said.

US companies Hunt Oil, and HKN Energy Ltd., a Hillwood International Energy company, have also signed deals with the Kurdish authorities.

"It sounds that there have been a couple new contracts out there, US and non-US companies that have been going in and looking for business, and we would just continue to caution that there is significant risk there at this point," McInturff said. "I haven't heard about the Iraqi oil minister's comments at this point but we will definitely look into it. We're watching the situation very closely."

Iraqi Oil Minister Hussein al-Shahristani earlier threatened to cancel contracts that foreign oil companies signed with the government of the Kurdish autonomous region if the controversial oil bill is not passed. "Any company that has signed contracts without the approval of the federal authority of Iraq will not have any chance of working with the government of Iraq," Shahristani was quoted as saying by the press. "We warned the companies that there will be consequences... that Iraq will not allow its oil to be exported."

Iraq has the third-largest proven oil reserves in the world. The hydrocarbons framework law is stalled before the Iraqi Parliament due to bitter differences between warring political factions over the sharing of lucrative revenues from the crude.

The US State Department spokesman told New Europe, "We're encouraging the Iraqi government to move ahead with the law. We're strongly supporting them in doing so."

The bill opens up the long state-dominated oil and gas sector to foreign investment and assures that receipts will be shared equally between Iraq's 18 provinces.

McInturff cautioned all US companies to do their research and do their homework before they jump into international deals. "Northern Iraq, the whole Kurdish region is obviously not the most stable region," he said.