Kurdish Ministers Woo U.S. Oil Firms

An official of one major oil company, who spoke on condition of anonymity to avoid compromising talks with central or regional Iraqi officials, said: "Frankly, I don't think there are any opportunities at the moment in northern Iraq that are appropriate for a company [of our] size. . . . They're too small."

Smaller firms, however, have rushed to sign exploration and production contracts there. They include affiliates of Russia's Alfa-Access-Renovo group, India's Reliance Industries, the Korea National Oil Corp. and Austria's major oil firm, OMV.

Asked about the absence of major oil companies, Hawrami said TNK-BP had signed a contract. BP said that it was not involved but that its Russian partner had entered the agreement on its own.

Some of the recent signing activity may have begun when Dallas-based Hunt Oil, whose chief executive Ray L. Hunt is a member of the President's Foreign Intelligence Advisory Board and a major contributor to Bush's campaigns, signed a contract in September. Smaller U.S. companies have followed suit.

The Hunt contract upset the State Department, which has been pressing Iraq to adopt a petroleum law that would delineate the division of authority between the central and regional governments.

In a Sept. 28 meeting with the Washington representatives of major oil companies, two State Department officials insisted that the Bush administration's policy was that U.S. companies should not sign separate deals with the Kurdistan Regional Government without approval from the central government in Baghdad.

According to one person at the meeting, the officials warned that some of the blocs being offered by the Kurdish government lay outside its territory and might extend into Turkey or Iran. While conceding that the Hunt deal did not violate any U.S. law, they said it created an "unfortunate and untimely" impression that the U.S. government was changing its position on the need for a national petroleum law.

Reports surfaced nearly a year ago that central and regional authorities were close to a deal on the law, but no agreement has been reached. The key issues in dispute are the types and terms of contracts offered to foreign companies, whether the central or regional governments have the power to sign contracts, what portion of revenue flows to the central government, the composition of a federal commission empowered to review contracts, and whether the committee that distributes oil receipts is part of the central finance ministry or an independent group.

Some Iraqis accuse the Kurdish regional authorities of giving overly generous terms to foreign oil companies in production-sharing agreements. In those agreements, a foreign firm takes on all the risk of exploration but gets a share of production if it finds oil.

Hawrami said the foreign firms would get no more than 15 percent of production under recent contracts and less if the regional government chooses to take a one-quarter stake in the venture after oil is found. He said contracts in relatively peaceful areas would offer smaller percentages to foreign companies.

Production from fields in the Kurdish area would be exported through a pipeline that goes through Turkey, Hawrami said. The pipeline, which has been damaged by frequent explosions, carried 300,000 barrels a day in October, an improvement some industry experts attribute to increased patrols by Kurdish militia and Iraqi helicopter monitoring.

Hawrami said that Shahristani's threats against firms that sign contracts in the Kurdish region were counterproductive and that delays were costing Iraq money. "We don't need his approval," Hawrami said. "Every time we hear the word 'illegal,' we sign two more contracts."