Hunt Oil Makes Deal to Seek Oil in Iraq

U.S.-based Hunt Oil signs a deal to explore for oil in Iraq. It's the first major oil contract between a U.S. company and Iraq in decades. But it was signed with the Kurdistan Regional Government, the body that runs Iraq's four northern provinces.

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The American firm Hunt Oil has signed a deal to explore for oil in Iraq. It's the first major oil contract between an American company and Iraq in many decades. But this one was not signed with the central government in Baghdad. It signed with the Kurdistan Regional Government, the body that runs Iraq's four northern provinces. This is a high-risk investment for a company that generally embraces risk.

NPR's Adam Davidson reports.

ADAM DAVIDSON: Everyone knows Iraq is sitting on a lot of oil. So of course anyone in the oil business has got to be interested in getting into Iraq. But equally obviously there are some problems - and not just all the violence. Iraq doesn't have any laws governing the oil industry.

We don't know yet if Iraq is going to have a national oil company or a lot of private oil firms. We don't know the basic legal rules that will govern oil investment. So any money Hunt Oil or anyone else spends today could be wasted. The government could pass a new law and just appropriate the whole thing.

Mr. QUBAD TALABANI (Kurdish Regional Government Representative to the United States): Those concerns are a little dramatized, to be honest with you.

DAVIDSON: That's Qubad Talabani. He is the son of Iraq's president Jalal Talabani. Qubad represents Kurdistan in the U.S. He points out that the central government has no oil law, but Kurdistan does. And Kurdistan has had very little of the violence and political turmoil of the rest of Iraq.

Mr. TALABANI: Given the fact that there is a very stable political and security environment in the Kurdistan region today, have reassured Hunt Oil that this deal is something worth investing in.

DAVIDSON: Kurdistan has been, as Talabani says, open for business since before the war. It has been largely autonomous of the central government since 1991. Kurds have developed business ties with Americans, Europeans, Asians. It's common to see global business people flying into Irbil airport from Europe, staying at the local Sheraton for meetings. There are lots of big deals for new shopping centers, factories, resorts.

But all that can be a bit misleading, says Rochdi Yunsi, an Iraq analyst for the Eurasia Group.

Mr. ROCHDI YUNSI (Eurasia Group): If you compare the Kurdish region in northern Iraq to the rest of the country, truly it is by far the more stable one. However, it's not Switzerland either.

DAVIDSON: Yunsi points out that Kurdistan has been quiet, in part because some much of the violence in Iraq has been in the center of the country, in Baghdad and Anbar province.

Mr. YUNSI: As the U.S. military continues to chase violent al-Qaida elements out of the Anbar province, many of these militants escaping that part of Iraq are moving northwards.

DAVIDSON: Right into Kurdistan. But Yunsi says an even bigger risk for Hunt Oil could be that legal issue. The central government in Baghdad, the parliament we keep hearing is ineffective, has not been able to pass an oil investment law because the issues are very contentious.

Sunni groups want a share of the country's oil wealth. Some Shiite groups are not so eager to enrich their potential rivals. The Kurds and the Arabs don't agree on where the actual boundary between their regions should lie. It's contentious, often ugly.

Mr. YUNSI: International oil companies that are willing to bypass Baghdad and deal directly with the Kurdish regional authorities and sign contracts, et cetera, expose themselves to being blacklisted eventually by the central Iraqi government.

DAVIDSON: That's a risk the relatively small Hunt Oil is willing to take. But the bigger firms are not. The majors, like ExxonMobil and Shell, for now seem content to wait on the sidelines until the legal situation at least is more stable.

Adam Davidson, NPR News.

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