I was privileged two years ago to be invited, as an observer, to attend a roundtable in Paris where about 30 Iraqis from inside and outside of Iraq, with experience in government and the oil sector, convened over three days to discuss in a candid and open manner how to define an oil policy for Iraq. To my surprise – and the shock of everyone else in the room – the much awaited energy minister of the KRG, Mr. Ashti Hawrami, who was expected at a session to discuss the problems between Baghdad and Erbil, metamorphosed into the shape of Mr. Peter Galbraith. Ambassador Galbraith, as he introduced himself, explained that he was attending the Iraqi meeting to make a speech on behalf of Mr. Hawrami. The indignation of the Iraqi attendees was absolute. The “Ambassador” was politely told there’s no place for him at that meeting. It was for “Arabic speakers” only.
At the time, rumors were widespread about “Mr. five percent” of the 21st century, aka Peter Galbraith. They never went away, just like other rumors that are common currency among oil companies that you don’t win a production-sharing contract with the KRG unless you pay a “token”.
With retrospect, and now that the mercantile relationship between the Kurdish leaders and Mr. five percent is out in the light, one cannot help question the rationale behind using such a representative to champion the Kurdish cause. Was Mr. Galbraith really looking after Kurdish interests or his own during the drafting of the Iraqi constitution and in advising Mr Hawrami on how to conduct a Kurdish oil policy?
The experience of the KRG with oil companies over the past few years has turned out to be a complete fiasco. Granting non-competitive exploration rights – with or without graft – to any company willing to sign on the dotted line does not, and will not, make of the KRG an oil exporter. Oil produced in the region is land-locked. That’s a fact that should have been clear to all the adventurers who opted to deal with the Kurdistan region as if it’s the Kurdistan state. This includes DNO which has invested its money to develop a small field but is yet to recover its costs, let alone its profit, or even Crescent’s Dana Gas which is delivering natural gas from the KorMor gas field to the KRG but is more likely to go into the red before it recovers its over $1 billion reportedly owed to it by the KRG.
There will be a moment of truth when the Kurdish leaders will have to decide whether they want to be an integral part of Iraq or not, but no way they can continue being both. It’s obvious that they have a lot to gain from being in than from being out, not the least a share of the oil bonanza that will come with the huge development enterprise that is about to start in southern Iraq. But that would require pooling all of the Iraqi oil for the benefit of all of the people, in discourse like in practice.
Its not just the KRG signing contracts “with anyone who is willing to sign the dotted line.” The oil minister has done the same and behind closed doors. At least you can with minimum effort find out what the KRG PSCs look like in the light of day by simply googling KRG model psc. R factors are also available on the KRG website. Where are the supposedly transparent Ministry of oil contract details?
I wouldn’t call opening bids in front of TV cameras “behind closed doors”! Model contracts are not exactly contractual terms. A model contract does not tell you how much is being paid whether in signature bonuses or to unidentified “third party”. Furthermore, the KRG signed contracts do not all have unified terms. My assessment is based on the few signed ones I’ve seen. If in doubt, read the Shamaran contract referred to by Peter Wells in “Studies” section and compare with the model PSC. It’s also available on the internet. Do you happen to know how many companies bid for each of the blocks awarded by the KRG before the best offer was chosen?