Iraq flares up on Reliance deal with Kurdish govt

Iraq flares up on Reliance deal with Kurdish govt
16 Nov, 2007, 0056 hrs IST,Rajeev Jayaswal, TNN

RIYADH: Iraq has threatened to bar Reliance Industries (RIL) from oil deals for signing oil block contracts in the Kurdish region. RIL recently executed two production-sharing contracts (PSC) with the Kurdistan Regional Government (KRG), covering petroleum exploration activities in the Rovi and Sarta blocks in the Kurdistan region of Iraq.

Iraqi oil minister Hussein Al-Shahristani said on Thursday that Iraq’s federal government does not recognise the deal. “The contracts have no standing with the Iraqi government. The companies that have signed the contracts with the Kurdish region may compromise chances of getting future contracts in Iraq,” he replied on the sidelines of the third Opec summit when asked about the RIL oil deals.

The oil deals seem to have angered Baghdad, which opposes a unilateral crude oil block selloff in the absence of a national oil law. The federal government of Iraq had urged the regional government of Kurdistan against signing an oil deal till the new national oil law was passed in Iraq Parliament.

Reacting to the development, RIL said its agreement with the autonomous KRG conformed to law. “The two exploration blocks in northern Iraq in Kurdistan region, for which we have signed the agreement, are within the legal framework,” RIL said in a statement issued here.

“RIL has always maintained highest cordial relationship with the government of Iraq and all other stakeholders in the countries where we operate. We will continue to do so in future,” the statement said.

Al-Shahristani said any independent deal with KRG would face difficulty in exporting oil from the region as Iraq would not allow its oil to be exported. Kurdistan lies in the north of Iraq and does not have a port for export of oil. Companies producing oil in the region have to necessarily go to southern ports that come under the administrative control of the federal government of Iraq.

On November 8, RIL announced it had executed two contracts with KRG covering petroleum exploration activities in the Rovi and Sarta blocks. Under the terms of the contract, Reliance Exploration & Production DMCC, a wholly-owned subsidiary of RIL, would serve as the operator. The blocks measuring 450-500 sq km are highly prospective and have almost 80% oil-bearing structure.

According to sources, RIL is likely to make a discovery soon. The company had paid a signing amount of $15.5-17.5 million for the blocks. While announcing the deal, RIL president (international operations) Atul Chandra had said, “We are pleased to reach an agreement with the KRG on the two PSCs.

We hope and believe this will be an investment that will provide long-term benefits to all the stakeholders.” RIL has established a local office in Erbil and has undertaken extensive geological work over the past year in the Kurdistan region.