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CASE: IB-102
DATE: 9/14/12
Charles Nicas prepared this case under the advisement of Professor Condoleezza Rice and Professor Amy Zegart as
the basis for class discussion rather than to illustrate either effective or ineffective handling of an administrative
situation. Engyn Oil & Gas and its employees and advisors are entirely fictional.
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ENGYN IN IRAQ:
CHOOSING BETWEEN BAGHDAD AND ERBIL
The politics in all of this should not be underestimated.
—Manny Duvalier, Advisor to the CEO, Engyn Oil & Gas
When Maryellen Wellington, chief executive of Engyn Oil & Gas, exited the conference room,
she knew she had a big decision to make. Walking through the marble entryway of the Rotana
Hotel in Erbil, the capital of the Kurdistan Regional Government (KRG) of Iraq, she wondered
whether the future of her company lay in the ground beneath the disputed city of Kirkuk.
KRG officials had just offered a $2 billion exploration and production contract for three tracts of
land in Iraq’s oldest oilfield. Entering the Iraqi market offered a big opportunity for Engyn, but
Wellington knew that investing in Iraq also posed a number of risks. For one, the complex
dispute between Iraqi Arabs and Kurds was suddenly a central consideration for the firm. As
Wellington ducked her head into the waiting car, she questioned whether a deal with the KRG
would be worth the potential cost of losing access to energy resources in the rest of Iraq.
OVERVIEW
When the Iraqi Oil Ministry held its first licensing round since the U.S.-led invasion in 2003,
more known oil reserves were put up for bid at one time than at any other moment in history. 1
Iraq’s combined oil and gas reserves rivaled Russia’s for the second-largest in the world, making
the underdeveloped market a potentially lucrative prospect for international oil companies. 2 But
the transition that opened the Iraqi energy frontier brought with it violence, instability and
1 Greg Muttitt, Fuel on the Fire: Oil and Politics in Occupied Iraq (New York: New Press, 2012), pp. 255-256.
2 Steve Coll, Private Empire: ExxonMobil and American Power (New York: The Penguin Press, 2012), p. 558.
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Engyn in Iraq IB-102
p. 2
uncertainty. By 2007, Iraq had a federal political system, a popularly ratified constitution and a
newly elected government, but its leaders failed to agree on a framework to govern the country’s
oil and gas resources. The failure in effect bifurcated the development of Iraq’s energy sector
between the Arab south and Kurdish north, creating a vast legal gray area and making the
political situation much more complicated for foreign firms seeking to invest.
The most daunting political minefield for foreign energy firms was the long-running dispute
between the central government in Baghdad and the KRG in Erbil, which for decades enjoyed a
limited degree of autonomy. The conflict struck at the heart of the new Iraqi state. The primary
dispute was about federalism: the limits of the central government’s power, the prerogatives
reserved for regions and provinces, and the relation of that power balance to the country’s oil and
gas resources. The dispute had even deeper roots in the ethnic cleavages between Iraq’s Arab
and Kurdish communities and the Kurdish people’s decades-long struggle for an independent
national homeland.
From the perspective of foreign investors, the conflict between Baghdad and Erbil gained
salience because of the geographic distribution of the country’s energy resources. Iraq’s known
petroleum reserves totaled more than 140 billion barrels, the fourth-largest reserves in the
world. 3 The largest share was centered in the southern half of the country, where the population
was Arab and mostly Shiite. The other portion—roughly 45 billion barrels—was located in
northern Iraq, in and around territory controlled by the KRG. 4 In the years during Iraq’s post-
war transition, the Kurds exploited ambiguity in the constitutional provisions governing Iraq’s
energy resources and made deals with foreign oil firms independent of the Iraqi central
government. Baghdad rejected the validity of the KRG deals and threatened to disqualify any
company that maintained one from bidding on new contracts in the rest of the country.
ENGYN OIL & GAS
Founded in 1963, Engyn Oil & Gas was a mid-sized Canadian energy company based in Alberta.
Since its initial public offering in 1994, Engyn engaged in a full range of oil- and gas-related
activities, specializing in conventional on- and off-shore drilling and production, oil-sands
development and refining. More than 60 percent of Engyn’s operations were located in North
America, but the firm also had a sizable presence in Peru and Ecuador, and about 5 percent of its
revenue came from operations in Libya.
When Wellington took over as CEO in October 2010, Engyn shareholders were in search of a
new direction. An engineer by training, Wellington started at the company in 1990 and was
promoted several times before becoming executive vice president of North American operations
in 2002. In that role, she was responsible for Engyn’s most important region and oversaw the
deployment of new oil-sands-recovery technology. In 2010, Wellington was appointed CEO to
replace Bill Phillips, whose five-year tenure was criticized by some board directors as a period of
stagnation. Phillips had taken the helm with a business strategy focused on increasing revenues
from existing upstream operations and investing more in marketing and distribution services.
3 Business Monitor International, “Iraq Oil & Gas Report Q2 2012,” April 2012, p. 15.
4 Sylvia Pfeifer and Javier Blas, “Kurds Talk to Two More Oil Groups,” The Financial Times, November 13, 2011,
http://www.ft.com/intl/cms/s/0/4565d858-0e1a-11e1-91e5-00144feabdc0.html (July 26, 2012); in addition, many
experts believed that Iraq’s western deserts might also hold large undiscovered reserves.
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Engyn in Iraq IB-102
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The approach was slow to show results, and Engyn’s independent board responded to growing
shareholder concern by replacing Phillips.
Opportunities to Grow
Wellington took on the CEO position with a new growth strategy in mind, one that emphasized
acquisitions and new exploration and production contracts. In her first month as chief executive,
she tasked Walt Daniels, Engyn’s executive vice president for exploration, with assembling a
team of business and geological analysts to recommend promising growth opportunities for the
firm. After two months of study, Daniels’ team reported its results. Among the
recommendations, which included expanding activities in the U.S. Gulf of Mexico and Libya,
one captured Wellington’s imagination more than others: Iraq.
As the team’s analysis explained, the case for Engyn to enter the Iraqi oil market was
straightforward. Iraq’s recently opened energy sector was the largest new oil and gas frontier
since the collapse of the Soviet Union. 5 Iraq had some of the world’s biggest petroleum reserves,
and out of all the countries in the oil-soaked Middle East, it had the greatest potential for oil-
production growth. 6 The country’s turbulent history had prohibited exploration in many
promising areas, and its undiscovered oil reserves were estimated to total an additional 45 billion
to 100 billion barrels. 7 Daniels’ team argued that Iraq’s geology destined the country to assume
a leading role in the global energy market, and that Engyn had an opportunity to get in at the
ground floor and ride its rise to the top. The argument struck Wellington as compelling, and she
told Daniels she wanted to explore opportunities in Iraq in greater depth.
Over the next four months, as Engyn officials engaged in wide-ranging consultations on Iraq,
they identified formidable deterrents to investment. Despite the country’s favorable geology,
Iraq’s energy sector was plagued by security concerns, political instability and legal uncertainty.
Insurgent attacks had fallen from their peak during the civil war, but al Qaeda and other
extremist groups still operated in the country, and lingering sectarian tension threatened to
reignite. In 2011, the withdrawal of U.S. troops was followed by a surge of political infighting,
and opponents of Prime Minister Nouri al-Maliki accused him of trying to reinstall dictatorship. 8
Meanwhile, the conflict between Iraqi Arabs and Kurds continued to obstruct legislation to
uniformly govern the country’s energy resources, and the internal boundary of Iraqi Kurdistan
remained contested by both sides—nowhere more so than in Kirkuk (see Exhibit 1 for a map).
To manage these complexities, Wellington concluded she needed the assistance of an expert, so
she brought on board Manny Duvalier, who had served as political director for Staffan de
Mistura, special representative to Iraq of the UN Secretary General from 2007 to 2009.
In order to navigate the federalism dispute between Iraq’s Arabs and Kurds, Wellington took
Duvalier’s advice and pursued a two-pronged approach to engage both the central government
and the KRG. Engyn started with the Iraqi Oil Ministry. The oil and gas industries in Iraq were
5 Carola Hoyos, “Oil Groups Resist Iraq’s Tough Bid Terms,” The Financial Times, June 30, 2009,
http://www.ft.com/intl/cms/s/0/7b34ebb0-65a0-11de-8e34-00144feabdc0.html (July 13, 2012). 6 Business Monitor International, “Iraq Oil & Gas Report Q2 2012,” April 2012, pp. 15, 6.
7 Energy Information Agency, “Country Analysis Briefs: Iraq,” September 2010,
http://www.eia.gov/cabs/Iraq/Full.html (July 23, 2012). 8 Michael S. Schmidt, “Rising Strife Threatens Tenuous Iraqi Stability,” The New York Times, January 22, 2012,
http://www.nytimes.com/2012/01/23/world/middleeast/stability-in-iraq-threatened-amid-power-struggle.html
(September 13, 2012).
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Engyn in Iraq IB-102
p. 4
entirely owned by the state (including each step of the process—e.g., exploration, development,
production, refining, distribution, marketing). In order to get a piece of the action, foreign firms
had to qualify with the Iraqi Oil Ministry to bid during licensing rounds and then win bilateral
awards with the state or state-owned agencies. 9 Engyn investigated licensing and acquisition
opportunities in southern Iraq, focusing on the Rumaila oil field near the southern city of Basra,
and successfully applied to bid in the next licensing round organized by the Oil Ministry.
Meanwhile, Engyn representatives ramped up talks with officials from the KRG. The Kurds
estimated that Iraqi Kurdistan had roughly the same oil reserves as Libya, with more discoveries
awaiting. 10
Engyn representatives found the contracting process with the KRG to be more
opaque than with the Oil Ministry, but the contract terms were generally more lucrative and
Kurdish officials seemed as if they were eager to close a deal. As discussions advanced, Kurdish
officials invited Wellington to Erbil.
Fielding an Offer from the Kurds
After watching violence in Iraq on the nightly news for much of the previous decade, Wellington
was surprised by what she found in Iraqi Kurdistan. The country’s civil war had mostly spared
Kurdish areas, enabling KRG officials to boost the region’s image as “the other Iraq.” 11
That ad
campaign was part of a broader effort by Kurdish officials to demonstrate their commitment to a
friendly business environment. In 2006, the KRG adopted an investment law that—unlike Iraqi
federal law—treated foreign investors the same as native Kurds. 12
The surge of foreign
investment that followed brought infrastructure upgrades, air transit to Europe, new hotels and
restaurants, and reliable water and electricity. 13
Wellington found Erbil to be a gleaming city
that, in comparison to Baghdad, exuded a sense of security, modernity and optimism.
In Wellington’s meeting with Kurdish President Massoud Barzani, an official from the KRG
Ministry of Natural Resources laid the terms of the offer on the table. In exchange for $2 billion,
Engyn would win a 15-year lease to explore and produce in three tracts of land near the oil-rich
city of Kirkuk. The Kurds offered a production-sharing agreement (PSA), a type of contract
common in the oil industry but considered too generous by the Iraqi central government. The
PSA was part of the appeal for Wellington, but Duvalier was quick to point out a wrinkle in the
deal: the tracts of land on offer were located squarely in the “disputed territories” claimed by
both Erbil and Baghdad. Kurdish officials assured Wellington that the contract would remain
valid throughout its term, regardless of political developments in the country. But they needed
an answer soon, they said. Wellington was expected to respond to the offer within two weeks.
9 Business Monitor International, “Iraq Oil & Gas Report Q4 2011,” October 2011, p. 45.
10 Pfeifer and Blas, “Kurds Talk to Two More Oil Groups,” November 13, 2011.
11 Lydia Khalil, “Stability in Iraqi Kurdistan: Reality or Mirage?” Brookings Institution, Working Paper No. 2, June
2009, p. 3; Kurdistan Development Corporation, “Kurdistan: The Other Iraq,” www.theotheriraq.com (August 27,
2012). 12
Business Monitor International, “Iraq Oil & Gas Report Q4 2011,” October 2011, p. 25; Kurdistan Regional
Government, “Law No. (4) of 2006: Law of Investment in Kurdistan Region ‒ Iraq,” July 2006, Section 3, Article 3,
http://www.krg.org/uploads/documents/InvestmentLaw_KRGOfficialEng__2006_08_04_h11m20s33.pdf (July 23,
2012). 13
Hassan Hafidh, “Iraq Might Ask Shell to Take Over Exxon Field,” The Wall Street Journal, November 22, 2011,
http://online.wsj.com/article/SB10001424052970204531404577051811747273468.html (July 26, 2012).
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Engyn in Iraq IB-102
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With the clock ticking, Wellington left the meeting and soon discovered that the competition was
also heating up. On her way back to the airport, she received word on her BlackBerry that the
leadership team from Petroboom, one of Engyn’s primary competitors, had just been spotted
arriving at the hotel behind her. 14
Wellington knew Petroboom’s management team had been
exploring talks with the Kurds, but their presence in Erbil suggested the parties were advancing
faster than expected. Duvalier, who was sitting next to her in the SUV, questioned aloud
whether the timing was a ploy by the KRG.
“This place is complicated,” Wellington thought to herself. She resolved to get up to speed
about the history of Iraqi politics, and she told her staff to do the same. She started with what
seemed to be a simple question: Who are the Kurds?
HISTORY OF THE KURDS AND IRAQ
The Kurds of western Asia have been called the world’s largest ethnic group without a state. 15
Native to a broad region covering parts of modern-day Turkey, Iran, Syria and Iraq, the Kurds
originated from multiple tribes that lived near the northern part of the Tigris-Euphrates river
basin along the Zagros and Taurus mountain ranges (see Exhibit 2 for a map of Kurdish-
inhabited areas). 16
The term Kurdistan, meaning land of the Kurds, was first used in the twelfth
century but its borders were never clearly defined and it has been contested ever since. 17
Quest for Statehood
Although Kurdistan has never existed as a comprehensive political unit, the Kurds nearly
attained statehood at the close of the First World War, when the colonial powers of the time—
mainly Great Britain and France—drew the political boundaries of the modern Middle East.
With the collapse of the Ottoman Empire, a vast region stretching from Persia to Europe fell into
Allied control, and the strengthening international norm of self-determination fueled Kurdish
hopes for a state. In a joint declaration from 1918, Britain and France outlined their shared goals
for the region, saying they aimed for “the complete and final liberation of the peoples who have
for so long been oppressed by the Turks, and the setting up of national governments and
administrations that shall derive their authority from the free exercise of the initiative and choice
of the indigenous populations.” 18
American President Woodrow Wilson paved the way for this
sentiment in his Fourteen Points, which called for non-Turkish nationalities under Ottoman rule
to be given an “absolutely unmolested opportunity for autonomous development.” 19
In the following years, however, the Kurds’ prospects for an autonomous or independent state
became increasingly remote. The Treaty of Sevres in 1920, which abolished the Ottoman
Empire, marked a high point in the Kurdish struggle, promising an autonomous region in Turkey
14
Like Engyn Oil & Gas, Petroboom is a fictional company. 15
Kevin McKiernan, The Kurds: A People in Search of Their Homeland (New York: St. Martin’s Press, 2006), p. 4. 16
Kerim Yildiz, The Kurds in Iraq: Past, Present and Future (London: Pluto Press, 2007), p. 7. 17
Yildiz, op. cit., p. 7. 18
David McDowall, A Modern History of the Kurds (London: I. B. Taurus, 2004), 3 rd
ed., p. 163. 19
Woodrow Wilson, “President Woodrow Wilson’s Fourteen Points,” The Avalon Project, January 8, 1918,
http://avalon.law.yale.edu/20th_century/wilson14.asp (August 15, 2012).
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Engyn in Iraq IB-102
p. 6
and an option for a future independent state. 20
In 1923, that document was superseded by the
Treaty of Lausanne, which formalized Turkey’s new borders. In a stark reversal, the document
made no promise of autonomy or independence for the Kurds, and over the next few years a web
of enduring political boundaries dissected the region inhabited by the Kurdish people. 21
To the
south of eastern Turkey, Britain created the modern state of Iraq by combining three Ottoman-
era administrative districts: Basra, Baghdad and Mosul (see Exhibit 3 for a map of modern Iraq).
The result was a heterogeneous mix of ethnicities (e.g., Arabs, Kurds, Turkoman) and religious
sects (e.g., Sunni, Shiite).
From the end of the British mandate in 1932 to the assumption of power by the Baath Party in
1968, the Kurds of Iraq gradually organized as a political and military force. Under the
leadership of Mullah Mustafa Barzani, the Kurdish movement for autonomy won control of large
portions of Erbil and Dohuk provinces near Iraq’s northern border. While in exile in 1946,
Barzani founded the Kurdish Democratic Party (KDP), which was the first Kurdish organization
to join capabilities for politics and combat. 22
Kurdish “peshmerga” forces (meaning those who
face death) fought regularly with the Iraqi government to advance their cause, taking advantage
of the state’s infirmity as it struggled through a series of coups. 23
The Kurds and the Baath Party
In 1968, the Baath Party seized power in Iraq for the second time, after a short-lived reign at the
beginning of the decade. Despite being based on a pan-Arab socialist ideology, the Baath Party
was eager to shore up its rule by mollifying Kurdish grievances. The first step in that process
was the March Declaration of 1970. Devised by then-Deputy President Saddam Hussein, the
March Declaration formally granted the Kurds an unprecedented degree of control over their
own affairs. 24
While the substance of the declaration met many of the Kurds’ central demands,
the agreement was never implemented. One major sticking point was the Kurds’ insistence that
the oil-rich city of Kirkuk be included in their semi-autonomous region. 25
Fighting resumed in
the early 1970s as cooperation between the Kurdish parties and the government broke down. 26
The geopolitics of the Cold War played an underlying role in the conflict, with Baghdad and
Moscow signing a friendship pact in 1972, and the Kurds receiving covert assistance from the
United States and the Shah of Iran. 27
20
The Treaty of Sevres, The World War I Document Archive, Ed. Richard Hacken, August 10, 1920, Brigham
Young University Library, http://wwi.lib.byu.edu/index.php/Section_I,_Articles_1_-_260 (August 15, 2012); Ofra
Bengio, The Kurds of Iraq: Building a State Within a State (Boulder, CO: Lynne Rienner Publishers, 2012), p. 10. 21
Bengio, op. cit., p. 10. 22
Bengio, op. cit., p. 13. 23
McDowall, op. cit., p. 311. 24
The agreement promised that, inter alia, Kurdish-majority areas would be allowed to forge a self-governing unit,
the Kurdish language would be treated as the official language alongside Arabic in those areas, local officials would
either be Kurdish or Kurdish-speaking, and the federal constitution would be amended to reflect Iraq’s binational
identity, according to McDowall, op. cit., p. 328. 25
David Romano, “Iraqi Kurdistan: Autonomy’s Challenges in the Wake of U.S. Withdrawal,” International
Affairs, Vol. 86, No. 6 (2010): 1346. (Ultimately, much as they would later do during the constitutional negotiations
in 2005, the Kurds agreed to delay a final decision on Kirkuk until a census could be taken after the March
Declaration was issued, according to Bengio, op. cit., p. 42.) 26
McDowall, op. cit., p. 330. 27
Yildiz, op. cit., p. 22.
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Engyn in Iraq IB-102
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In 1974, amid growing regional tension and heightened Kurdish demands, Saddam Hussein
imposed legislation that nominally granted autonomy to Iraqi Kurdistan, but its provisions fell
short of the March Declaration and the details allowed the central government to retain ultimate
control. 28
The Autonomy Law of 1974 technically remained in force until 1992, but by that time
many of its legislative and administrative structures had stopped functioning. 29
The intervening
period saw the passing of the baton from Mustafa Barzani to his son Massoud, the establishment
of a rival Kurdish party—the Patriotic Union of Kurdistan (PUK)—under the leadership of Jalal
Talabani, and a complete breakdown in relations between the Iraqi government and the Kurds.
Kurds During the Iran-Iraq War
When Iraq invaded Iran to take advantage of the instability that followed the Islamic Revolution
of 1979, the Kurds became implicated in the eight-year war. Some Kurdish groups, including
the KDP, assisted Iran as it sought to repel Iraqi forces. 30
The PUK, which had previously
aligned with Saddam, joined forces with the KDP in 1986 to oppose the Iraqi government. 31
Given Iran’s involvement in brokering the truce, the Kurdish efforts at unity caused deep
consternation in Baghdad, and Saddam Hussein responded with characteristic brutality. 32
Starting in at least 1988, the Iraqi army used ground forces, artillery, aerial bombing and
chemical weapons against Kurdish villages in northern Iraq. Nearly 3,000 villages were
destroyed in total, some razed by bulldozer. 33
By conservative estimates, the so-called Anfal
campaign (meaning “spoils of war”) killed more than 50,000 rural Kurds in 1988. 34
Kurdish
sources put the toll much higher, claiming 1.5 million refugees and approximately 180,000
deaths. 35
The international community responded by passing UN Security Council resolutions
612 and 620, which condemned the use of chemical weapons in the Iran-Iraq war. 36
Human
Rights Watch said Saddam’s crimes in the mountains of northern Iraq amounted to genocide. 37
Establishment of the Kurdistan Regional Government
After surviving the Anfal campaign, Iraqi Kurds returned fire just a few years later. In the
waning days of the 1991 Gulf War, Iraq’s non-Sunni majority rose in revolt as it became
apparent that Iraqi troops would be forced to accept a ceasefire and withdraw from Kuwait,
which they had invaded in August 1990. In Iraq’s Shiite south and Kurdish north, anti-Baathist
28
For example, the Autonomy Law of 1974 granted the Kurdish region responsibility for its own finances; yet it
also gave the Iraqi president powers over the region’s executive council, placed police and security forces under the
national Ministry of Interior, and made decisions of the regional entity subject to review by the Iraqi supreme court.
The Kurdish region was defined by “the existence of a Kurdish majority according to the 1957 census,” according to
McDowall, op. cit., p. 336, and Yildiz, op. cit., p. 21. 29
Yildiz, op. cit., p. 22. 30
Bengio, op. cit., p. 172. 31
Bengio, op. cit., p. 173. 32
Yildiz, op. cit., p. 25. 33
Yildiz, op. cit., p. 25. 34
Human Rights Watch, Genocide in Iraq: The Anfal Campaign Against the Kurds, July 1993,
http://www.unhcr.org/refworld/docid/47fdfb1d0.html (September 6, 2012). 35
Yildiz, op. cit., p. 25. 36
Security Council Resolution 612, United Nations, May 9, 1988, http://daccess-dds-
ny.un.org/doc/RESOLUTION/GEN/NR0/541/39/IMG/NR054139.pdf (September 6, 2012); Security Council
Resolution 620, United Nations, August 26, 1988, http://daccess-dds-
ny.un.org/doc/RESOLUTION/GEN/NR0/541/47/IMG/NR054147.pdf (September 6, 2012). 37
Human Rights Watch, Genocide in Iraq: The Anfal Campaign Against the Kurds, July 1993,
http://www.unhcr.org/refworld/docid/47fdfb1d0.html (September 6, 2012).
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Engyn in Iraq IB-102
p. 8
mobs poured into the streets and ransacked official buildings. 38
Saddam Hussein responded by
crushing the uprisings with brute force, retaking control of cities such as Kirkuk and killing
thousands of Iraqis in the process. 39
As a result of the violence and subsequent refugee crisis, the UN authorized the establishment of
no-fly zones in the north and south of the country and an assistance mission to protect the Kurds
in April 1991. 40
By the end of the year, Iraqi troops pulled back from Kurdish territory to a
defensive position on the frontline and slowly tried to impose an economic blockade on the
region. 41
With their newfound separation from Iraqi forces, the Kurds, backed by UN protection,
implemented long-standing plans to establish a regional government.
The Kurdistan Regional Government (KRG) came into existence with elections in May 1992,
which brought to power the parties of Massoud Barzani (KDP) and Jalal Talabani (PUK). 42
Relations between the two main Kurdish parties worsened after the 1992 election as they fought
over money and territory. 43
The parties sought external alliances to bolster their domestic
positions, with the PUK receiving support from Iran and the KDP cooperating for a time with
Saddam Hussein. Repeated reconciliation attempts throughout the mid-1990s, including top-
level international involvement, finally produced a breakthrough in September 1998. 44
In
Washington, Barzani and Talabani issued a statement outlining their agreement on several
fundamental power-sharing arrangements that remained intact through the war in 2003. 45
CONTESTING KIRKUK
The KRG offer to Engyn entailed the right to explore three fields located near the ethnically
diverse city of Kirkuk, home to Iraq’s first major oil discovery in 1927. 46
Long wedged between
the Ottoman and Persian empires, Kirkuk had been prized—and contested—for centuries due to
its location along central trade routes. Kirkuk was incorporated into modern-day Iraq as part of
Mosul province in the 1920s, at a time of growing recognition of the region’s natural resource
potential. 47
The battle for control of the city, which increasingly pitted Arabs against Kurds,
continued through the twentieth century and into the twenty-first.
Kurdish claims to the city were largely based on demography. Although the ethnic makeup of
Kirkuk had long been disputed, Kurds were thought to constitute a plurality in the city and
surrounding area at the time of Iraq’s founding. But the Kurds were one of several groups.
38
McDowall, op. cit., p. 371. 39
Human Rights Watch, Endless Torment: The 1991 Uprising in Iraq and Its Aftermath, June 1992,
http://www.hrw.org/reports/1992/Iraq926.htm (September 6, 2012). 40
Security Council Resolution 688, United Nations, April 5, 1991, http://daccess-dds-
ny.un.org/doc/RESOLUTION/GEN/NR0/596/24/IMG/NR059624.pdf (September 6, 2012). 41
McDowall, op. cit., p. 378. 42
Bengio, op. cit., p. 202. 43
Yildiz, op. cit., p. 48. 44
Yildiz, op. cit., p. 49. 45
The Washington Agreement, “Final Statement of the Leaders’ Meeting,” Hurriyet Daily News, September 17,
1998, http://www.hurriyetdailynews.com/default.aspx?pageid=438&n=final-statement-of-the-leaders-meeting-
september-17-1998-1998-10-05 (August 30, 2012). 46
Paul Sankey, David T. Clark and Silvio Micheloto, “Iraq: The Mother of All Oil Stories,” Deutsche Bank Global
Markets Research, October 4, 2010, p. 55. 47
Liam Anderson and Gareth Stansfield, Crisis in Kirkuk: The Ethnopolitics of Conflict and Compromise
(Philadelphia: Univ. of Pennsylvania Press, 2009), p. 20.
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Engyn in Iraq IB-102
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During the Ottoman period, Kirkuk served as the capital of an important administrative unit, and
Turkish families were encouraged to move there to assume privileged positions in the civil
service. 48
The resulting wave of Turkish immigration constituted the foundation of the
Turkoman community in Kirkuk that remained a significant component of the city’s population.
In addition to Kurds and Turkomans, Arabs made up the other major sector of Kirkuk’s
population. In the twentieth century, the growth of the Arab share of the population was the
product of a deliberate campaign known as the “Arabization” of Kirkuk. Driven in part by a
desire to control the region’s oil wealth, the effort started under the Arab monarchy in the 1930s
and was accelerated by subsequent regimes. Saddam Hussein in particular was responsible for
moving thousands of Arabs, often impoverished Shiites from southern Iraq, into the city. The
effect of the policy was evident in the city’s census, although it was never clear to what degree
the following figures were manipulated by the regime to undermine Kurdish claims. According
to the government of Iraq at the time, Kirkuk’s Arab population grew from 109,620 in 1957 (28
percent), to 218,755 in 1977 (45 percent), to 544,596 in 1997 (72 percent). 49
Correspondingly,
census figures show the Kurdish share of the population falling across the same periods, from 48
percent to 38 percent to 21 percent. 50
Post-War Kirkuk and the “Disputed Territories”
Kirkuk’s status in the aftermath of the 2003 invasion became a major sticking point in post-war
reconciliation. As coalition troops initially advanced against Iraqi forces, the Kurdish peshmerga
militia in some cases fought alongside the invading force. In wide stretches of land across
northern Iraq, peshmerga fighters took advantage of the situation to expand the territory under
their control. Located south of the so-called Green Line that had demarcated Iraqi Kurdistan
since 1991, the land that newly fell under Kurdish control became known as the “disputed
territories.” The size of the territories was significant: under its maximalist claims, the Kurdish
region in Iraq would increase from approximately 15,000 square miles to almost 27,000 square
miles. 51
Few parts of this region were more disputed than Kirkuk.
After Iraq’s new constitution was ratified in 2005, Kirkuk presented a dilemma of increasing
political and legal complexity. Article 140 of the Iraqi constitution, designed to establish a
framework to resolve the conflict, was unsuccessful. Article 140 called for a three-phase process
to determine the status of Kirkuk and other disputed territories: first, “normalization” of the
population; second, a census; and third, a referendum. If implemented as written, the
normalization stage entailed undoing decades of forced and unforced migration in a matter of
months. 52
Iraqis who had been expelled from the region would be allowed to return, and those
who had been brought there to alter the demography would be resettled in their original homes. 53
Then, according to the plan, a census was to be conducted to reveal the composition of the
“normalized” population, and a referendum was to offer the population a choice of joining the
KRG. All three phases were to be complete by December 31, 2007. 54
Amid political
48
Anderson and Stansfield, op. cit., p. 61. 49
Anderson and Stansfield, op. cit., p. 43. 50
Ibid. 51
Muttitt, op. cit., p. 234. 52
Anderson and Stansfield, op. cit., pp. 167-168. 53
Ibid. 54
Iraqi Constitution, Article 140, http://www.uniraq.org/documents/iraqi_constitution.pdf (August 22, 2012);
Anderson and Stansfield, op. cit., p. 135.
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Engyn in Iraq IB-102
p. 10
wrangling—both within Kirkuk and between the KRG and Baghdad—the process fell behind
schedule, in no small part due to the legal and logistical challenges of the normalization phase. 55
When the December 2007 deadline passed, it remained unclear whether Article 140 became null
and void, or whether its time frame could be delayed without being amended. No answer to that
question materialized.
The dispute over Kirkuk remained a central front in the KRG’s wider struggle for autonomy
from the Iraqi central government. In the aftermath of the 2003 war, Kurdish parties managed to
overcome their differences and form a united front in the confrontation with Baghdad. The
Kurds joined together on a single electoral list in the January 2005 elections for Iraq’s
transitional government, which was tasked with drafting a constitution. 56
At the same time, the
KRG held its first post-Saddam election for the KRG regional assembly. Massoud Barzani was
elected president of the KRG in June 2005, one month after his longtime rival Jalal Talabani was
selected as president of the transitional government in Baghdad. 57
In 2006, the Kurds announced
a formal unity deal between the main Kurdish parties and made several moves that fueled
tensions with Baghdad, including the establishment of a KRG foreign ministry and a decision to
fly the Kurdish flag—not the Iraqi flag—over government buildings in the region. 58
Evidence of
the Kurdish push to stake a claim to political and economic decision making in Iraq extended to
the oil industry.
IRAQI OIL INDUSTRY
Political risk in the Iraqi oil industry was never more evident than on June 1, 1972, when
Saddam Hussein ordered the nationalization of the country’s energy sector, starting with the
oilfield near Kirkuk. 59
According to some observers, the decision was taken in part to preempt
Kurdish claims to the region’s natural resources. 60
At the time, the Iraqi Petroleum Company—a
consortium that included American, French and British oil firms—had operated at the field for
more than 40 years and had won the exclusive right to exploit almost all of Iraq’s oil. 61
With
nationalization, the industry came under the control of the Iraq National Oil Company, which
was replaced in 1987 by 15 state-owned oil companies operating at the direction of the Iraqi Oil
Ministry. 62
After Saddam’s fall, it became clear that the long period of nationalization had taken its toll.
“The Baathists invested only what they absolutely had to, almost nothing once they nationalized
55
Anderson and Stansfield, op. cit., pp. 167-168. 56
Yildiz, op. cit., p. 126. 57
Iraq Profile, “Iraq Timeline,” BBC News, August 19, 2012, http://www.bbc.co.uk/news/world-middle-east-
14546763 (August 22, 2012). 58
Iraq Profile, “Kurdistan Timeline,” BBC News, June 24, 2012, http://www.bbc.co.uk/news/world-middle-east-
15467672 (August 22, 2012); Bengio, op. cit., p. 305. 59
“Iraq Takes Over Big Oil Company After Talks Fail,” The New York Times, June 2, 1972,
http://query.nytimes.com/mem/archive/pdf?res=9B02E5DE1F3EE63BBC4A53DFB0668389669EDE (July 23,
2012). 60
Bengio, op. cit., p. 83. 61
Sankey, Clark and Micheloto, op. cit., p. 55. 62
Amy Myers Jaffe, “Case Study on Iraq’s Oil Industry,” James A. Baker Institute for Public Policy, March 1, 2007,
p. 5, http://www.bakerinstitute.org/programs/energy-forum/publications/docs/NOCs/Presentations/Hou-Jaffe-
Iraq.pdf (August 30, 2012).
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Engyn in Iraq IB-102
p. 11
Iraq’s oil industry,” said one expert who advised occupation forces. 63
Under Saddam, in the
absence of foreign investment, the country’s oil and gas infrastructure had become outdated and,
in some places, facilities and equipment had fallen into disrepair. Restoring the flow of oil and
extracting resources from new wells would require time, expertise and substantial investment,
and the Iraqi Oil Ministry knew it would need the help of foreign oil firms.
Reliance on outside support was an uncomfortable reality for some Iraqi officials, many of
whom resented past exploitation of Iraq’s oil wealth by foreign entities. The American-run
Coalition Provisional Authority (CPA) sought to avoid those concerns when it took over
administration of Iraq in 2003. 64
CPA Order 39, issued in September of that year, prohibited
new exploration and production contracts with foreign oil firms until an elected government
could take office under a new constitution. 65
In a sign of things to come, however, KRG officials
in northern Iraq ignored CPA Order 39. 66
In the following years, the KRG signed contracts with
mid-sized foreign firms to manage operations at two northern oil fields, Tawke and Taq Taq. 67
Iraqi officials in Baghdad protested but were, for the time being, powerless to stop the deals.
Constitutional Interpretations
The constitutional deliberations of 2005 gave Iraq an opportunity to clarify the legal murkiness
surrounding the Iraqi oil industry and the validity of the KRG’s oil contracts. Negotiations were
tense. An electoral boycott in January 2005 left Sunni interests underrepresented on the
constitution-drafting panel, while Kurdish parties pressed their advantage and tried to seek
maximal concessions. The Kurds viewed a robust federal system as the best way to preserve
their autonomy while retaining access to the central government’s revenues. 68
Shiite parties
were reluctant to grant the KRG privileges that would not be similarly extended to Shiite-
majority provinces in the south. The result was deadlock on several important issues.
Rather than letting the unresolved disputes scuttle the whole constitution, negotiators agreed to
imprecise language that obscured disagreement and postponed resolution. For the Iraqi oil
industry, the result was a set of constitutional provisions that would be interpreted differently by
different parties:
Article 111: Oil and gas are owned by all the people of Iraq in all the regions and
governorates.
Article 112: First: The federal government, with the producing governorates and
regional governments, shall undertake the management of oil and gas extracted
from present fields, provided that it distributes its revenues in a fair manner in
proportion to the population distribution in all parts of the country, specifying an
63
L. Paul Bremer III, My Year in Iraq: The Struggle to Build a Future of Hope (New York: Simon & Schuster,
2006), p. 61. 64
Coll, op. cit., p. 567. 65
CPA Order Number 39, “Foreign Investment,” Coalition Provisional Authority, Section 6, Part 1, September 19,
2003, http://www.iraqcoalition.org/regulations/20031220_CPAORD_39_Foreign_Investment_.pdf (August 15,
2012). 66
Coll, op. cit., p. 567. 67
Nicholas Pelham, “Disputed Oil Contracts Put Kurdish Autonomy to the Test,” The Financial Times, August 13,
2004, http://www.ft.com/intl/cms/s/0/62f97c9a-ed79-11d8-a587-00000e2511c8.html (August 16, 2012). 68
Yildiz, op. cit., p. 133.
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Engyn in Iraq IB-102
p. 12
allotment for a specified period for the damaged regions which were unjustly
deprived of them by the former regime, and the regions that were damaged
afterwards in a way that ensures balanced development in different areas of the
country, and this shall be regulated by law.
Second: The federal government, with the producing regional and governorate
governments, shall together formulate the necessary strategic policies to develop
the oil and gas wealth in a way that achieves the highest benefit to the Iraqi people
using the most advanced techniques of the market principles and encouraging
investment. 69
The central government interpreted these provisions to mean that it would share responsibility
for the development of the country’s oil wealth with the governorates and regions, but that
federal law took precedence over regional or provincial law and the central government would
retain the final say in energy-related matters. In the north, the Kurds interpreted the provisions to
mean that, although the federal government would have a direct role in managing the
development of existing fields, the KRG would be free to sign exploration contracts and develop
new fields without interference from Baghdad. 70
Oil and Revenue-Sharing Laws
In line with the second provision of Article 112, the Iraqi parliament began working on a set of
laws to govern the country’s oil and gas industry in 2006. Iraq’s hydrocarbon law would
establish an ownership framework and a process for leasing oil and gas rights throughout the
country. A revenue-sharing law was intended to ensure that Iraqis living in regions without large
reserves would still get a portion of the country’s natural-resource wealth. Under the revenue-
sharing provisions, oil and gas revenues would be put in a central government bank account and
distributed across the country according to pre-agreed shares, more or less based on population.
With a target to pass the legislation by May 2007, the Iraqi parliament worked on the issues for
several months before ultimately falling short. The Kurds rejected the proposed approach
because they did not trust Baghdad to disperse the money faithfully; instead they wanted the
Kurdish share of the federal budget to bypass the central government and go directly to the KRG.
Although the formal revenue-sharing legislation was not passed, a provisional arrangement
awarded the Kurds a 17-percent share of the annual federal budget.
When negotiations over the oil law and revenue-sharing provisions bogged down in parliament,
the Kurds warned that they would not be held back. 71
As the deadlock cemented over the
summer of 2007, the KRG regional assembly approved its own legislation that formally
authorized Kurdish officials to negotiate new contracts with foreign oil firms to explore and
produce in land under Kurdish control. The law’s passage opened up a flood of investment into
69
Iraqi Constitution, op. cit., Articles 111-112. 70
International Crisis Group, “Iraq and the Kurds: The High-Stakes Hydrocarbons Gambit,” Middle East Report No.
120, April 19, 2012, p. 5, fn. 9,
http://www.crisisgroup.org/~/media/Files/Middle%20East%20North%20Africa/Iraq%20Syria%20Lebanon/Iraq/120
-iraq-and-the-kurds-the-high-stakes-hydrocarbons-gambit.pdf (July 28, 2012); Credit Suisse, “Energy in 2012,”
Equity Research, January 3, 2012, p. 164. 71
Carola Hoyos, “Iraq's Kurds to Go It Alone on Oil Deals,” The Financial Times, March 23, 2007,
http://www.ft.com/intl/cms/s/0/3e26d986-d8e4-11db-a759-000b5df10621.html (August 22, 2012).
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Engyn in Iraq IB-102
p. 13
Iraqi Kurdistan, and the KRG signed more than 40 deals with oil and gas firms in the following
years, including more than 20 by the end of 2008. 72
Baghdad rejected the contracts as
unconstitutional and vowed to retaliate against any firm that took part.
Pipeline Dispute
Although the Iraqi government refused to acknowledge the legitimacy of the oil contracts signed
by the KRG, it eventually came to accommodate—at least partially—the deals signed before
Iraq’s transition to an elected government. Those contracts, involving the Tawke and Taq Taq
fields, revealed both how far the Kurds could go on their own as well as the limits that they
faced. From the Kurds’ perspective, the problem struck at the core of their oil industry’s
viability: the Kurds had few overland export routes that could be utilized without the approval of
the central government.
In southern Iraq, export infrastructure was well developed, with pipelines running to Basra and
the Persian Gulf port, where oil could be loaded on 200-million-barrel tankers and shipped
anywhere in the world. 73
Northern Iraq, however, was not so fortunate. The primary overland
export route was the Kirkuk-Ceyhan pipeline, which connected the disputed oil field to the
Turkish Mediterranean. The Iraqi federal government controlled the pipeline, and even if the
Kurds got Baghdad’s permission to use it, the Iraqi Finance Ministry received the export
revenues, not the KRG. 74
In November 2008, Iraqi officials agreed to allow the Kurds to use the pipeline to pump oil from
the Tawke and Taq Taq fields, but they refused to acknowledge the KRG’s contracts as legal. 75
For Baghdad, the agreement meant an increase in much-needed oil revenues; for the Kurds, it
sent an important signal to foreign oil firms that the resources produced in Iraqi Kurdistan had a
route to market. But although the confluence of interests enabled the parties to temporarily begin
exporting crude, the flow of oil started and stopped a number of times in subsequent years as a
result of a recurring dispute over payments. The Kurds held that the Iraqi Finance Ministry was
responsible for compensating the producing firms, while Baghdad told the Kurds to pay the firms
out of their annual share of the federal budget. 76
The KRG began pipeline exports in June 2009 but halted them by October because the firms had
received no payment from the central government. 77
Exports did not resume until February
2011, as part of a deal reached the month before. 78
That agreement came shortly after Kurdish
parties threw their support behind a second term for Nouri al-Maliki, Iraq’s prime minister. 79
In
72
Anna Fifield, Javier Blas and Delphine Strauss, “Baghdad and Kurds Near Oil Pact,” The Financial Times,
December 4, 2008, http://www.ft.com/intl/cms/s/0/117880ee-c22e-11dd-a350-000077b07658.html (August 22,
2012). 73
Coll, op. cit., p. 575. 74
Carola Hoyos and Roula Khalaf, “Kurdish Exports Resume Despite Iraq Impasse,” The Financial Times, May 27,
2009, http://www.ft.com/intl/cms/s/0/cdda068c-4adb-11de-87c2-00144feabdc0.html (August 15, 2012). 75
Carola Hoyos, William MacNamara and Anna Fifield, “Exports Offer Hope in Iraq Oil Share Row,” The
Financial Times, May 11, 2009, http://www.ft.com/intl/cms/s/0/1aec5cce-3e5a-11de-9a6c-00144feabdc0.html
(August 15, 2012). 76
Hoyos and Khalaf, “Kurdish Exports Resume Despite Iraq Impasse,” May 27, 2009. 77
Business Monitor International, “Iraq Oil & Gas Report Q4 2011,” October 2011, p. 48. 78
International Crisis Group, op. cit., p. 6. 79
Ibid.
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Engyn in Iraq IB-102
p. 14
May 2011, the Finance Ministry submitted its first payment to the firms at Tawke and Taq Taq. 80
Another payment followed in September 2011, but it was the last. 81
As it became apparent that
additional compensation would not be forthcoming, the Kurds slowly tapered the pipeline
exports from their peak at 175,000 barrels per day in July 2011 to a halt in April 2012. 82
At the
time, the Kurds said the cessation of exports would continue “until further notice.” 83
The lack of independent export capacity in Iraqi Kurdistan prompted the Kurds to search for
alternative options. One option was to export by truck. As the pipeline dispute continued, tanker
trucks were used to smuggle and export crude to Iran and Turkey. 84
Given that most tanker
trucks have an approximate capacity of 200 barrels, it would take more than 800 daily truckloads
to match the volume of pipeline exports at their peak in July 2011. Another option was the
construction of an alternate pipeline, which would handle greater volume but, as of 2012, could
not be completed for another two years. 85
Like large-scale truck exports, the pipeline would
need the cooperation of Turkey. Officials in Baghdad repeatedly made clear that Turkish
support for independent crude exports from Iraqi Kurdistan would seriously harm ties between
Ankara and Baghdad. 86
Iraqi Oil Ministry
With a newly elected government in place by 2006, the Iraqi Oil Ministry aimed to ramp up
exports from the prized fields in the south of the country. Increasing oil exports were central to
the country’s ability to stand on its own because Oil Ministry receipts constituted 95 percent of
federal revenues. 87
In April 2008, the government started by cancelling all oil contracts signed
under Saddam Hussein. 88
The country then set an ambitious goal to increase oil exports to 12
million barrels per day by 2017. 89
Although that export target was subsequently revised
downward by about half, such an increase remained substantial given that exports had fallen to a
post-war low of 1.1 million barrels per day in December 2005. 90
In order to boost revenues and meet the new export targets, the Iraqi Oil Ministry needed to work
with international energy companies who had the expertise, experience and equipment to get the
80
Christopher Thompson, “Kurdistan Oil Hopes Rise with New Ventures,” The Financial Times, August 8, 2011,
http://www.ft.com/intl/cms/s/0/e1f5729e-bf84-11e0-90d5-00144feabdc0.html (August 15, 2012). 81
International Crisis Group, op. cit., p. 6. 82
Ben Van Heuvelen, “Record Exports as KRG Cuts Oil,” Iraq Oil Report, April 2, 2012,
http://www.iraqoilreport.com/politics/oil-policy/record-exports-as-krg-cuts-oil-7666/ (August 15, 2012); Business
Monitor International, “Iraq Oil & Gas Report Q4 2011,” October 2011, p. 48. 83
International Crisis Group, op. cit., p. 7. 84
Sam Dagher, “Smugglers in Iraq Blunt Sanctions Against Iran,” The New York Times, July 8, 2010,
http://www.nytimes.com/2010/07/09/world/middleeast/09kurds.html (August 27, 2012). 85
Michael Kavanagh, “Kurdistan Players Pin Hopes on New Pipelines,” The Financial Times, August 27, 2012,
http://www.ft.com/intl/cms/s/0/71eee128-df14-11e1-97ea-00144feab49a.html (September 13, 2012). 86
Raheem Salman, Sylvia Westall, “Iraq Warns Kurdish Oil Exports to Turkey Harm Ties,” Reuters, July 15, 2012,
http://news.yahoo.com/iraq-warns-kurdish-oil-exports-turkey-harm-ties-140939933.html (August 27, 2012). 87
“Maliki to Name Iraq Government Monday,” Reuters, December 18, 2010,
http://www.reuters.com/article/2010/12/18/us-iraq-politics-shahristani-idUSTRE6BH0K420101218 (August 28,
2012). 88
Business Monitor International, “Iraq Oil & Gas Report Q4 2011,” October 2011, p. 49. 89
Javier Blas and David Blair, “Iraq Set to Miss Oil Output Goals,” The Financial Times, May 15, 2011,
http://www.ft.com/intl/cms/s/0/a7b1b332-7f14-11e0-b239-00144feabdc0.html (August 22, 2012). 90
“Iraq Oil Exports Hit Post-War Low,” BBC News, January 2, 2006,
http://news.bbc.co.uk/2/hi/business/4574954.stm (August 22, 2012).
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Engyn in Iraq IB-102
p. 15
industry back on its feet. But firms were concerned that Iraqi national pride and lingering anti-
colonial sentiment would hinder their ability to strike a profitable deal. Instead of production-
sharing agreements like those offered by KRG, the Iraqi Oil Ministry insisted on technical
service contracts, which secured less upside for the investing firm. Service contracts allowed the
government to retain full ownership of the project in exchange for a pre-agreed price for each
barrel of crude beyond a certain target. 91
That meant the producing firm had no chance at
windfall profits in the event of rising crude prices or a technological advancement. 92
In 2009, Baghdad officially opened the Iraqi oil and gas market with a series of bidding rounds
to award licenses to operate the country’s oil and gas fields. The first four rounds were held
between June 2009 and May 2012, and the result was a qualified success. After slightly
softening its terms, the Oil Ministry concluded deals for almost all of Iraq’s largest oil fields,
luring into the country major oil firms such as ExxonMobil, Royal Dutch Shell, BP, CNPC,
Lukoil, Petronas and Eni. 93
By July 2012, oil exports from southern Iraq reached 2.2 million
barrels per day, a level not seen since before 2003. 94
North-South Divide
The Oil Ministry’s progress boosting production in southern Iraq did not stop a rush of
companies from signing with the KRG in 2011 and 2012. Raising the stakes, the new entrants to
Iraqi Kurdistan included some of the world’s largest firms, and some of them defied Baghdad
while simultaneously ramping up production on Oil Ministry contracts. Whereas the KRG had
previously signed deals with mostly small- and medium-sized companies, in October 2011 it
signed a contract with ExxonMobil, its first in a string of deals with so-called supermajors. 95
Some analysts questioned whether the impact of the contracts would extend beyond the Iraqi
energy industry and challenge the very nature of the Iraqi state. 96
At the time of its deal with the KRG, Exxon had already spent almost two years increasing
production at the massive West Qurna-I field in southern Iraq, and at first Baghdad threatened to
cancel its West Qurna-I contract. 97
Iraqi officials later backed off that threat, opting instead to
move Exxon off a water-pipeline project and block it from bidding in future licensing rounds
until it canceled its KRG contract. 98
For Royal Dutch Shell, which was in negotiations with the 91
Coll, op. cit., p. 573. 92
Carola Hoyos, “Majnoon Win Gives Shell a Boost,” The Financial Times, December 14, 2009,
http://www.ft.com/intl/cms/s/0/fee1ef54-e8ee-11de-a756-00144feab49a.html (July 27, 2012); Carola Hoyos, “The
Downside of Offering a Cheap Oil Deal to Iraq Begins to Sink In,” Energy Source blog, The Financial Times,
February 11, 2010, http://blogs.ft.com/energy-source/2010/02/11/the-downside-of-offering-a-cheap-oil-deal-to-iraq-
begins-to-sink-in/ (July 27, 2012). 93
Business Monitor International, “Iraq Oil & Gas Report Q4 2011,” October 2011, pp. 49-54; Blas and Blair, “Iraq
Set to Miss Oil Output Goals,” May 15, 2011. 94
“Oil Market Report,” International Energy Agency, August 10, 2012, p. 17,
http://omrpublic.iea.org/omrarchive/10aug12full.pdf (August 22, 2012). 95
Sylvia Pfeifer, “Big Oil: Exxon Moves Shocks the Sector,” The Financial Times, December 7, 2011,
http://www.ft.com/intl/cms/s/0/1a0e76ce-1a6d-11e1-ae14-00144feabdc0.html (July 27, 2012). 96
Steve LeVine, “Will Oil Companies Provide Kurdistan Its De Facto Statehood?” Foreign Policy, August 1, 2012,
http://oilandglory.foreignpolicy.com/posts/2012/07/31/kurdistan_the_first_de_facto_state_created_by_the_action_of
_oil_companies (August 16, 2012). 97
Hassan Hafidh, “Iraq Might Ask Shell to Take Over Exxon Field,” The Wall Street Journal, November 22, 2011,
http://online.wsj.com/article/SB10001424052970204531404577051811747273468.html (July 26, 2012). 98
Sam Dagher, “Iraq Won’t Cancel ExxonMobil Deal,” The Wall Street Journal, December 9, 2011,
http://online.wsj.com/article/SB10001424052970203501304577088362771645908.html (July 26, 2012); Ben
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Engyn in Iraq IB-102
p. 16
Kurds alongside Exxon, that was enough disincentive to take a different route. 99
When
Baghdad’s threats against Exxon were at their height, Shell called off its talks with the Kurds to
preserve its contracts in the south, which shortly thereafter included a giant new gas deal in
Basra. 100
Unlike Shell, however, two other oil majors with existing operations in southern
Iraq—France’s Total SA and Russia’s Gazprom—soon followed Exxon’s example. They signed
their own deals with the KRG in the summer of 2012, shortly after Chevron signed one too. 101
In
contrast to the others, Chevron had decided to forego the Oil Ministry’s bidding rounds due to
the terms of the service contracts. 102
Signing with the KRG was its first entry into the country.
ENGYN’S RESPONSE TO THE KURDISH OFFER
When Engyn decided to explore opportunities in Iraq, the Oil Ministry was quick to approve its
application to participate in the next bidding round. But the next round was not scheduled to
take place until well after Engyn’s response to the KRG was due. Wellington was going to have
to make an up-or-down decision on the offer from the Kurds. She was eager to get more
information, and she leaned on Duvalier for advice, but she suspected she would probably have
to rely on her gut instinct and experience to make the right call.
Lando, “Maliki Threatens Exxon, Claiming Obama Support,” Iraq Oil Report, July 20, 2012,
http://www.iraqoilreport.com/politics/oil-policy/maliki-threatens-exxon-claiming-obama-support-8391/ (July 26,
2012). 99
Pfeifer and Blas, “Kurds Talk to Two More Oil Groups,” November 13, 2011. 100
Sylvia Pfeifer and Javier Blas, “Shell Pulls Out of Kurdistan Oil Talks,” The Financial Times, November 16,
2011, http://www.ft.com/intl/cms/s/0/87b4dbe8-107f-11e1-8010-00144feabdc0.html (July 26, 2012); Hassan
Hafidh, “Iraq Approves $17.2 Billion Shell Gas Deal,” The Wall Street Journal, November 15, 2011,
http://online.wsj.com/article/SB10001424052970204323904577040493225776170.html (July 27, 2012). 101
Michael Kavanagh, “Total in Kurdistan Deal with Marathon,” The Financial Times, July 31, 2012,
http://www.ft.com/intl/cms/s/0/96aacedc-db27-11e1-be74-00144feab49a.html (September 13, 2012); “Oil Groups
Eye Reserves in North Iraq,” The Financial Times, August 10, 2012, http://www.ft.com/intl/cms/s/0/363c136c-
e301-11e1-a78c-00144feab49a.html (September 13, 2012); “Iraq Bans Chevron Over Kurdistan Deal,” The
Financial Times, July 24, 2012, http://www.ft.com/intl/cms/s/0/570981f2-d5a4-11e1-af40-00144feabdc0.html
(September 13, 2012). 102
Ahmed Rasheed, “Iraq Blacklists Chevron for Kurdish Oil Deals,” Reuters, July 24, 2012,
http://www.reuters.com/article/2012/07/24/us-iraq-chevron-idUSBRE86N12A20120724 (September 13, 2012).
For the exclusive use of Z. Alawami, 2017.
This document is authorized for use only by Zainab Alawami in Issues in Global Marketing-Fall 2017 taught by Mark Parker, Niagara University from August 2017 to February 2018.
Engyn in Iraq IB-102
p. 17
Exhibit 1
Map of Disputed Territories and Oil Fields in Northern Iraq
Source: Soner Cagaptay, “The Future of Iraqi Kurds,” The Washington Institute for Near East Policy, July 2008.
Copyright © The Washington Institute for Near East Policy (WINEP). All rights reserved. Reprinted with
permission of WINEP.
For the exclusive use of Z. Alawami, 2017.
This document is authorized for use only by Zainab Alawami in Issues in Global Marketing-Fall 2017 taught by Mark Parker, Niagara University from August 2017 to February 2018.
Engyn in Iraq IB-102
p. 18
Exhibit 2
Regional Map of Kurdish-Inhabited Areas
Source: Perry-Castañeda Library Map Collection, University of Texas Libraries. Copyright © U.S. Central
Intelligence Agency.
For the exclusive use of Z. Alawami, 2017.
This document is authorized for use only by Zainab Alawami in Issues in Global Marketing-Fall 2017 taught by Mark Parker, Niagara University from August 2017 to February 2018.
Engyn in Iraq IB-102
p. 19
Exhibit 3
Political Map of Modern Iraq
Source: Perry-Castañeda Library Map Collection, University of Texas Libraries. Copyright © U.S. Central
Intelligence Agency.
For the exclusive use of Z. Alawami, 2017.
This document is authorized for use only by Zainab Alawami in Issues in Global Marketing-Fall 2017 taught by Mark Parker, Niagara University from August 2017 to February 2018.