By: Shwan Zulal
Protests started in Kurdistan on 17 February asking for better services, end to corruption and better government. After shooting and killing protesters by the authorities and many more violations against the public, the demands are now for government change and a complete overhaul of the political system. Kurdish opposition parties' have been walking out of parliament on daily bases and so far no end in sight to the protests.
Meanwhile the oil and gas exploration companies in Kurdistan keep finding more of the black gold. Many of the explorations companies share prices have been somewhat subdued and some have dropped significantly. The rising star of the bunch is GKP (Gulf Keystone Petroleum), they keep finding more oil, and just today, they have revised Shaikan discovery upward. Furthermore, HOIL (Heratige Oil) has recently discovered a significant natural gas field in Miran section but their share price have plunged. The concerns are that there are not any significant oil in the section and the gas infrastructure in Kurdistan Region is almost none existence.
Today's revision by GKP raises a dilemma for investors whether to pour in more capital and hope that the political turmoil abates, or pull the funds out until the political situations become clearer in Kurdistan. It is obvious that Kurdistan Region is not short of oil and gas. And there are plenty of investors who are willing to part with their cash in the hope of making large returns. So far, investors have shrugged off the unrest in Kurdistan because the protest has yet to spread to capital Erbil. However, the future is uncertain and political agreements are not in the horizon, and demonstrations may erupt in Erbil any minute.
The issue of the oil contracts have somewhat being resolved with Iraq government but as investors and analysts have found out in recent years, there are no such things as certainty in Iraq. All the agreements are very opaque and not clear if it will be binding in the future.
An official from the Iraqi oil ministry have been reported saying, "Husain Al-Shahristani is still in charge of the ministry," reported Awana newspaper. Shahristani have always being saying that the Kurdish Region oil contracts are invalid and keeps this opinion to date. On 9 April Al-Shahristani was asked by Asharq Al-Awsat about the legality of the Kurdistan region oil contracts. In reply, he said:"The central government did not review and did not approve the contracts that the Kurdistan Region government concluded. The central government informed the companies concerned that they have no right to operate on Iraq’s territories without its approval." Shahristani has also being quoted accusing the Kurdish government of "using the contracts to increase their revenue rather than contributing to Iraqi oil production", reported Awena. From the tone and language used by the deputy PM, it is clear he still hold very strong views about the Kurdish oil contracts.
After the formation of the new Iraqi government, Al-Shahristani was promoted to deputy prime minister for energy and he has been the main player in the dispute over the legality of Kurdish Region oil contracts. Awena also reported that the new Iraqi ministry of natural resources have been complaining that the new minister, Karim Lu'bi, has no powers because Shahristani influences most important decision taken by the ministry. Furthermore, the source has told the newspaper that the new minister cannot take any decision without the approval of Al-Shahristani especially concerning the Kurdish oil contract.
Meanwhile, Iraqi lawmakers are calling for a new ministerial code of conduct. They believe that Al-Shahristani's interference in oil ministry is due to lack of regulation.
Iraqi government is in a state of paralysis, politicians cannot agree to appoint a minister let alone decide on such important issue like oil contracts. Yet the political commotion and demands by Kurdish public to bring down the government may prove to be a hard one for investors to swallow.
Due to the balance of power between Iraq and Kurdistan region, resolving the legality of Kurdish contract is inevitable. The Iraqi government is set to accept the legality the contracts, but the question of timing and political concessions remains.
Iraqi and Kurdish political leaders must get their act together otherwise they risk alienating investors. It is clear that Iraq is like a very dysfunctional family and just like any other, its members ie citizens are hurting. Iraqi Politicians have yet to get a grip and learn how to compromise, unless this happens the future is uncertain.
Also see The debacle of DNO's share sale to Turkish Genel Enerji and the role of Kurdish minister in question
Also see The debacle of DNO's share sale to Turkish Genel Enerji and the role of Kurdish minister in question
