Iraq Oil Update  

Energy Bulletin has a good mini-round up of news from Iraq, starting with a report from The Times on a large oil find in northern Iraq - Heritage Oil strikes big in Kurdish Iraq.

A huge oil discovery in Kurdish Iraq sent the share price of Heritage Oil, the London-based explorer, soaring yesterday and added further pressure on Baghdad to issue permits for long-awaited exports of crude oil from the region.

Heritage said that tests completed on a well drilled in its Miran West concession revealed reserves of between 2.3 billion and 4.2 billion barrels. Heritage reckons that between half and 70 per cent of the oil is recoverable, suggesting that at least one billion barrels can be brought to the surface.

...The find has potentially greater political consequences: at present there is no export route for Kurdish oil because of continuing arguments between Baghdad and the Kurdish Regional Government (KRG) in Arbil. Negotiations are under way to secure permits from Baghdad to allow oil from Tawke, a separate discovery by DNO, a Norwegian oil company, to be transported via Iraq’s northern pipeline to the Turkish port of Ceyhan.

The FT, meanwhile, is noting that even though the infamous Iraq Oil Law still hasn't been passed, the majors are heading back in anyway - Oil groups set to end 40-year exile from Iraq.

International oil companies are preparing to go back into Iraq by the end of the year, despite Baghdad's failure to pass an oil law and continuing concerns over security.

BP and Royal Dutch Shell are among companies expected to bid for oil service contracts next month, with the long-term objective of being allowed to develop the world's third-largest oil reserves.

In the past week, executives from many of the world's biggest oil companies - expelled almost 40 years ago - have assured Iraqi officials they plan to commit to working in the country.

...For five years, following the US invasion of Iraq, oil executives had been insisting on better security and the passage of a hydrocarbon law - seen as crucial by the Bush administration as an indicator of political stability - before they would be willing to invest billions of dollars. Now the companies say they are prepared to return to Iraq even though the country's oil law remains bogged down by political discord and its fragile peace faces two imminent tests: the forthcoming elections and the US military's departure.

Thamir Ghadhban, chairman of the advisory board to Iraq's prime minister and a former oil minister, told the Financial Times that the coming bidding round - the first since the end of the 2003 war - would be heavily subscribed.

"International oil companies are short of reserves and opportunities and countries control almost 88 per cent of oil reserves. The only real opportunity is Iraq."

The Times reports that CFR head Richard Haass is lobbying for Obama to renege on his promise to pull all troops out of the country by 2012, due to a surge in militant activity (after they stopped paying the Sunni tribesmen enough to keep them docile - looks like the success of the "surge" was due to the surge of cash, not of troops) - we'll see how much change in US foreign policy really has happened before too long, I guess - Iraq bloodshed rises as US allies defect.

IRAQ is threatened by a new wave of sectarian violence as members of the “Sons of Iraq” – the Sunni Awakening militias that were paid by the US to fight Al-Qaeda – begin to rejoin the insurgency.

If the spike in violence continues, it could affect President Barack Obama’s pledge to withdraw all combat troops from Iraqi cities by the end of June. All US troops are due to leave the country by 2012.

A leading member of the Political Council of Iraqi Resistance, which represents six Sunni militant groups, said: “The resistance has now returned to the field and is intensifying its attacks against the enemy. The number of coalition forces killed is on the rise.”

...Richard Haass, president of the US Council on Foreign Relations, who returned from a visit to Iraq last week, said: “It is obvious there are still multiple faultlines in society. In my view, Iraq and the United States are going to have to adjust the timelines and leave a residual force of tens of thousands beyond 2011.”

The resistance council recently issued a call to disaffected Sons of Iraq to take up arms against US and Iraqi troops after the government of Nouri al-Maliki failed to integrate them into the national security forces.

...The US had been paying nearly 100,000 Sons of Iraq to participate in its security “surge”, but handed over responsibility for their welfare to the Iraqi government last month. Their pay has since dried up. Only 5,000 members of the Awakening have been employed by the Iraqi security forces.

...Obama may now become a hostage to events, Haass fears. “This administration has so much on its plate in terms of foreign policy that the last thing it needs is an Iraq that unravels. If it has to do a bit more than it wanted, that could be a pretty good investment.”