Focusing On The Non-Oil Sector - Part 41 - Iraq's Kurdistan Regime Consolidated.

The results of the July 25 presidential and parliamentary elections in Kurdistan represent a turning point in that region's history. They have bolstered the authority of rebel-turned veteran statesman Mas'oud Barzani, 63, as president of Kurdistan, voted in with a nearly 70% majority. A joint list between his Kurdistan Democratic Party (KDP) and the Patriotic Union of Kurdistan (PUK) of Iraq's President Jalal Talabani won 57% of the ballots cast, giving them 55 seats in the 111-member parliament - a total much less than before.

The Kurdistan Regional Government (KRG) is going ahead with plans to offer more E&P blocks to international oil companies (IOC) in competition with Baghdad and to spend almost $5bn of income from its 31 exploration and production sharing agreements (EPSAs) on local intrastructure. These EPSAs have resulted in the discovery of almost 5bn barrels of oil and a lot of natural gas. Baghdad does not recognise the legality of KRG's EPSAs and the Iraqi Oil Ministry is only offering service contracts with very limited profits to IOCs (see the following pages).

The Iraqi Oil Ministry's first auction for six of the country's largest and developed oilfields and two gas fields on June 30 was a disaster, as only one field was taken by a JV of BP and the state-owned China National Petroleum Corp (CNPC). About 30 other IOCs made sure their bids were to be rejected - their polite way of declining to invest in a high-risk country where the rewards in 20-year service contracts on offer were far below expectations and in the absence of a law governing the petroleum sector (see Part 40 in ood1-IrqFieldsAuctnJuly13-09).

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