One of the poorest areas of Iraqi Kurdistan, Germian, is also one of the regions that suffered most from Saddam Hussein’s genocidal Anfal campaign : thousands of its villagers were deported and summarily killed in the late 1980s. Today, however, Germian is te scene of Kurdistan’s emergence on the world oil market.
It began in May 2006 when Western Zagros, a subsidiary of Western Oil Sands, a Canadian company, signed a Production Sharing Agreement (PSA) with Jalal Talabani’s government in Suleimania – at that time Kurdistan was divided in two rival administrations, led by Masoud Barzani’s KDP in Erbil, and Jalal Talabani’s PUK in Suleimania. In July 2007 Marathon Oil bought Western Oil Sands – but declined to acquire the assets of subsidiary Western Zagros. It was a mistake and a big one, Western Zagros’ 2,000 sq km block in Germian would prove home to a mega-oil field, one that looks likely to change the face of Kurdistan.
However, it took a few more twists of history for the truth to be discovered. After renotiating its agreement with the Kurdistan Regional Government (KRG) in 2008, Western Zagros, run by Simon Hatfield, an entrepreneur who had been active in Iraq for many years, drilled its first well, Sarqala 1, near the village of Hasira.
However, after going down to 4,300 meters, without finding oil, Sarqala 1 was abandoned and the company began drilling elsewhere. In May 2009, disaster struck with an internal blowout In the new well. It took over four months, until October, to control it. Throughout this period, Western Zagros was in a dire financial straits. « They owed money everywhere », recalled the manager of a local Kurdish logistics company based in Suleimania, « nobody would have bet on them coming through .»
But the management of Wesrern Zagros refused to give up hope. They returned to the first well, Sarqala 1, and in May 2011, their persistence paid off with the discovery of a good light oil, testing at 40 API.
Today, Sarqala 1 produces 4,000 barrels of oil a day (b/d). « We now have the revenue to pay for the two wells, » explains Ian McIntosh, the vice president f Western Zagros, "and we are ranked fifth among the oil producing companies of Iraqi Kurdistan », after the Norwegian DNO, Taq Taq’s TTOPCO, KAR and Dana Gas.
The once desolated area of Germian is witnessing tremendous change. A processing plant has been built near the village of Hasira, to separate the gas,which is still flared, as well as a loading station for the tanker trucks that transport the oil. It takes about 35 minutes to load each of the 20 tankers with18 tons of crude apiece.
Western Zagros is planning to increase production to 8,000 b/d this year and has also announced its intention to drill two more wells,which could boost production to 20,000 b/d.
Anything beyond 20,000 b/d of oil should ideally be exported by pipeline and, logically, such a pipeline should connect the Western Zagros block to the hub of Kirkuk. If relations between Bagdad and the KRG permit, it is anticipated that such a pipeline could be operational within a year.
SomSome 100 km northwest of Hasira, the oil field of Taq Taq, run by TTOPCO, a joint venture between Turkey’s Genel Enerji and the Chinese SINOPEC, is witnessing still more impressive changes. An industrial process plant with a capacity of 60,000 b/d has been built, for in excess of $50 million ; equipped with three 40,000 barrel capacity storage tanks, it connects 10 wells to the gas separators, while a nine-kilometre pipeline links the process plant to the loading station.
Here, operations proceed on a different scale : no less than 350 tankers drive daily to the loading station, where they are filled in 14 minutes.
Large expansion plans are under consideration at Taq Taq, including the construction of a second processing plant with a capacity of 90,000 b/d. The loading station would be enlarged to welcome 500 tankers daily and there are plans – currently under discussion with the KRG – to build a 270 km pipeline, with a capacity of 500,000 b/d, connecting Taq Taq to the Kirkuk-Ceyhan main pipeline at Pechkabour. Meanwhile,TTOPCO is drilling its 16th well.
At the end of last year, Kurdistan was producing 250,000 b/d and exporting 100,000 b/d. However, Bagdad agreed to raise the exportation to 175,000 b/d in 2012. The remaining crude is sold on the local market, to topping refineries, and to the Iraqi refinery at Bazian.
Ashti Hawrami, the minister of natural resources of the KRG, also has plans to put Kurdistan on the map of major gas-producng countries. Already, the UAE’s Dana Gas company is exploiting gas from the Khor Mor Field, which is used in power plants. Kirkuk, which previously had only six hours a day of electricity, is now enjoying 16 hours daily, thanks to electricity produced with gas from Khor Mor. And there are plans to build several power plants.
« Gas is going to be a big industry » explained an industry expert. « Kurdistan is going to produce and export electricity, and it will sell its gas to Europe through the Nabucco pipeline. »
In a little less than a decade since Saddam Hussein’s regime was overthrown, amazing change has taken place in Iraqi Kurdistan. « In 2006, it was difficult to bring in a company doing seismic surveys. In 2008, it was difficult to bring in drilling equipment. Now, we have six companies offering rigs, » noted an oil company manager operating in Kurdistan.
But the consecration of Kurdistan as one of the last oil frontiers for exploration came when it was announced that the US oil major Exxon had signed up for six blocks in Kurdistan – some of them even straddling the so-called disputed territories.
« It was a massive vote of confidence in Kurdistan… It dramatically changes its diplomatic position and its negotiating power play with Bagdad,» commented Ian McIntosh of Western Zagros, who wonders « how Ashti Hawrami managed to do it ».
According to persistent rumour, Exxon’s decision to invest in Iraqi Kurdistan despite Bagdad’s opposition was followed by another major, the French oil company Total, which sent a team to Kurdistan, and is allegedly about to sign a deal with Ashti Hawrami, who has become known internationally as the « architect of the Iraqi Kurdistan oil industry ».
(The Middle East magazine, March 2012)
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© Chris Kutschera 2012