Kurdish Ministers Woo U.S. Oil Firms

Regional Bid Angers Iraqi Government

Two top Kurdish leaders are a long way from the mountains of northern Iraq this week.

On Monday night, Omer Fattah Hussain was the toast of a dinner held at the 10,000-square-foot McLean mansion of Ed Rogers, a Reagan White House political director and current chairman of the lobbying firm Barbour Griffith & Rogers. In an opulent living room just off an art-filled entryway with a curved double stairway, the deputy prime minister of the Iraqi Kurds' autonomous region mingled with such luminaries as former assistant secretary of defense Richard Perle, former White House aide I. Lewis "Scooter" Libby and former White House press secretary Tony Snow.

Today, Hussain travels to Houston with Ashti Abdullah Hawrami, the Kurdish regional oil minister, to woo an even more important audience: U.S. oil companies.

After more than a year of political deadlock in Iraq over a national petroleum law, the Kurdistan Regional Government unanimously adopted its own petroleum legislation in August. In the past month, it has signed a dozen oil exploration contracts and hopes that foreign firms will ultimately invest $10 billion in the oil sector and bring 1 million barrels a day of new oil production from the Kurdish region over the next five years.

"Everyone is lining up . . . saying 'I want a piece of this action,' " said Hawrami, who hopes to complete negotiations on two more deals in Houston.

Hawrami said the contracts posed no conflict with Iraq's federal constitution. The Iraqi central government, however, is irate over the Kurdish contracts -- and the State Department isn't happy either. The Bush administration has been striving mightily over the past year to get a national petroleum law approved before international firms jump in.

In addition, a group of 60 Iraqi oil professionals signed a letter saying that the recent Kurdish contracts were a "dangerous step that has no legal or political standing whatsoever." Iraqi oil union leaders have also opposed the contracts.

Earlier this month, Iraqi oil minister Hussein Shahristani called the deals illegal. He warned that foreign oil companies that sign contracts with the Kurdish authorities without central government approval risk retaliation when seeking stakes in the bigger oil prospects in the southern part of the country. There are 51 known but undeveloped fields in Iraq.

Several major international oil companies have been talking to Baghdad about resuming work in the same giant southern fields where they had worked when Saddam Hussein was in power. And the central government indicated to them that it might rely on Hussein-era oil laws or offer service contracts if the new petroleum legislation is delayed, according to Kamal Field Aldasri, an economic adviser to the Iraqi government.

Aldasri said recently that the central government wants help in finding ways to boost output at the 27 operating oil fields throughout Iraq, which are producing well below their potential. The Kirkuk field, for example, used to produce almost 1 million barrels a day and now produces less than 200,000. The government's aims to boost production from the current 2.2 million barrels a day to 3 million, though it is running far behind schedule.

The major oil companies have been giving advice, reviewing data and training Iraqi oil workers -- without compensation. Royal Dutch Shell Group, for example, is drawing up a master plan for tapping for domestic consumption the more than 600 million cubic feet a day of natural gas now being burned off. Exxon Mobil, Chevron, BP and Total are also doing technical studies, industry sources say.

But given political uncertainty, legal disputes and security risks, the big international firms are not prepared to reenter the country with their own personnel.