Oil Companies--Some Run by Former Bush Officials--Make a Risky Move Into Kurdistan
This is very long, but thought worth posting, so will split it into sections. It is an article written for the April edition of 'Fast Company' Magazine.
In their haste to tap Kurdish reserves, dozens of oil companies -- several fronted by former Bush officials -- have undercut U.S. policy and fanned sectarian tensions in Iraq. They may also lose a fortune.
The Tawke oil field, just south of Iraq's mountainous border with Turkey, is a bare, windblown patch of hills in one of the Middle East's most isolated corners.
Three hundred miles north of Baghdad, it is also four hours by road from the nearest international airfield and hundreds of miles from the nearest seaport. But on April 12, 2005, more than 100 dignitaries from around the world trooped up to this bleak turf to observe a bit of history. One year earlier, a scrappy Norwegian oil company called DNO had become the first foreign business since the U.S. -- led invasion of Iraq, in March 2003, to purchase oil-drilling rights in the Kurdistan region; defying skeptics, the Norwegians had shipped in millions of dollars' worth of infrastructure and equipment, built an oil workers' camp, and brought in technicians from the Philippines, India, and Scandinavia. Now DNO had invited Kurdish officials, local luminaries, and assorted friends of the region to witness the launch of the first exploratory oil well on Kurdish soil in two decades.
Beneath a cloudless sky, the towering Qandil mountains along the Turkish frontier lent a touch of grandeur to the scene. E.xecutives and engineers from DNO took seats on sofas inside a tent erected in front of a Chinese-made drilling tower. Former peshmerga -- Kurdish freedom fighters -- guarded the facility with automatic weapons. Top officials of the Kurdish regional government (KRG), including Nechirvan Barzani, then prime minister, joined the DNO brass. So did one of Norway's wealthiest investors, the London-based Endre Rosjo, who had formed a partnership with the oil company.
Rounding out the entourage was Peter Galbraith, then 54. The son of famed Harvard economist John Kenneth Galbraith, Peter was the former U.S. ambassador to Croatia, a longtime friend of the Kurds, and one of America's most courageous and hands-on diplomats. He had become famous for chronicling the destruction of Kurdish villages by Saddam Hussein in 1987 while serving as a staffer on the Senate Foreign Relations Committee, and for alerting the world to the Kurdish refugee crisis at the end of the 1991 Gulf War. After teaching national-security strategy at Washington, D.C.'s National War College, Galbraith left in late 2003 to sign on as a paid, then subsequently unpaid, consultant to the Kurds; in that role, he spearheaded their constitutional negotiations with Iraq's central government as they pushed for regional autonomy and for control over their own oil riches. Galbraith, looking very much the diplomat in a black-and-gray pinstripe suit, took an honored place in the front row. As the giant drill began its work -- it would ultimately burrow 10,000 feet into the carbonate rock -- the crowd burst into applause.
Not everyone shared this enthusiasm. In Baghdad, central government officials reacted with rage to the news that DNO was drilling. These officials considered the Kurds' sale of Iraqi oil rights to be illegal and warned that it threatened to polarize further a country already fracturing along ethnic and religious lines. When Karsten Tveit, the Middle East correspondent for the Norwegian national t.elevision network, sought out Galbraith, the former ambassador shrugged off Baghdad's objections. The Kurds were "on safe ground," he insisted. "The Iraqi Constitution is completely clear about it." The fact that the constitution wouldn't be ratified for another six months didn't concern him: Galbraith, who'd had a hand in writing the document, seemed confident of what the final draft would say about Kurdistan's oil reserves. Iraq's government was responsible for petroleum in existing fields, he explained to Tveit, but the constitution "was silent" about new fields, including Tawke: "Everything [in Kurdistan] not listed as the exclusive power of the federal government belongs to [the Kurds], and [Tawke] falls into that category."
Years would pass before Tveit discovered that Galbraith was hardly a disinterested observer that day. In late 2009, Dagens Naeringsliv, a respected Norwegian paper, uncovered documents showing that nearly a year before the Tawke (pronounced taw-kay) ribbon cutting, DNO E.xecutives had quietly given Galbraith, along with Norwegian businessman Rosjo, a combined cut of 10% of the field's future revenue. The stake was Galbraith's compensation for having helped the company secure its exploration-and-production contract, a contract far more favorable to the Norwegians than the type favored by the central government in Baghdad -- and one made possible only if Kurdistan enjoyed the very autonomy Galbraith had been advocating.
Galbraith's deal with the Norwegians has since dissolved in acrimony after Kurdistan passed a new 2007 oil law disallowing certain third-party investors. DNO dropped both Galbraith and the Yemeni businessman who took over Rosjo's share, saying the agreement was contingent on approval from the KRG; the men have taken DNO to court for breach of contract and, even now, stand to do quite well: They could walk away with as much as $144 million in damages. (DNO has offered $12 million to settle.) Today, Tveit still feels misled by Galbraith. "He called himself a consultant," Tveit tells me. "He never said that he had a personal economic interest. It was clear he was hiding it."
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http://www.fastcompany.com/magazine/...tml?page=0%2C0