1.

IRAQI SUNNI LANDS SHOW NEW OIL AND GAS PROMISE
By James Glanz

New York Times
February 19, 2007
Page A1

http://www.nytimes.com/2007/02/19/world/middleeast/19oilfields.html

[PHOTO CAPTION: Brig. Gen. John R. Allen, left, at a well atop a deposit of oil and natural gas in the desert of Iraq’s western Anbar Province, near Syria.]

KARABILA, Iraq -- In a remote patch of the Anbar desert just 20 miles from the Syrian border, a single blue pillar of flanges and valves sits atop an enormous deposit of oil and natural gas that would be routine in this petroleum-rich country except for one fact: this is Sunni territory.

Huge petroleum deposits have long been known in Iraq’s Kurdish north and Shiite south. But now, Iraq has substantially increased its estimates of the amount of oil and natural gas in deposits on Sunni lands after quietly paying foreign oil companies tens of millions of dollars over the past two years to re-examine old seismic data across the country and retrain Iraqi petroleum engineers.

The development is likely to have significant political effects: the lack of natural resources in the central and western regions where Sunnis hold sway has fed their disenchantment with the nation they once ruled. And it has driven their insistence on a strong central government, one that would collect oil revenues and spread them equitably among the country’s factions, rather than any division of the country along sectarian regional boundaries.

Though Western and Iraqi engineers have always known that there are oil formations beneath Sunni lands, the issue is coming into sharper focus with the new studies, senior Oil Ministry officials said. The question of where the oil reserves are concentrated is taking on still more importance as it appears that negotiators are close to agreement on a long-debated oil law that would regulate how Iraqi and international oil companies would be allowed to develop Iraq’s fields. [See #2 below]

The new studies have increased estimates of the amount of oil in a series of deposits in Sunni territory to the north and east of Baghdad and in a series of deposits that run through western Iraq like beads on a string, and could contain as much as a trillion cubic feet of natural gas. The revised figures, though large, would not mean that deposits in Sunni territories could challenge the giant fields elsewhere in the country.

And while it would take years actually to begin pulling gas and oil out of the fields even if the area soon became safe enough for companies to work in, energy corporations have been excited about the area’s potential, even if it falls short of reserves in the Shiite south and Kurdish north.

The analysis, still little known outside a small circle of specialists, is important enough that on Friday, Brig. Gen. John R. Allen of the Second Marine Expeditionary Force, who is deputy commanding general of Multi-National Force-West, which has responsibility for Anbar Province, made the long trip into the desert to visit the blue wellhead. General Allen’s duties include promoting the economic development of the province.

The deposit beneath is the Akkas field, one of the beads on the string that runs from Ninewa Province in the north to the border with Saudi Arabia in the south.

“It’s phenomenal standing here,” General Allen said. “What this does is it gives Anbar and the Sunnis an economic future different from phosphate and cement,” he said, referring to products of some of the aging factories in the area.

“This gives them a future and a hope,” he said. Nearby, a few pieces of laundry flapped in front of one of the only structures in sight, a cinder-block shack probably belonging to a shepherd.

Iraqi oil production peaked at around 3.7 million barrels a day in 1979, as Saddam Hussein was coming to power, according to the United States Department of Energy.

The figure rose and fell over the years and stood at 2.6 million barrels a day just before the 2003 invasion. Current production is less than the prewar figure, a major disappointment for the American and Iraqi engineers who have struggled to rebuild the national oil infrastructure.

That production has always been concentrated in the north and south. But at various times Iraq has drilled a few exploratory wells in the Anbar desert and in a series of deposits north and east of Baghdad, where there has also been limited production, Natik K. al-Bayati, director of reservoirs and field development at the Oil Ministry, said in a recent interview.

For all of its wells, Iraq has also collected seismic data -- records of the tremors that ripple through the earth’s crust and can be used like X-rays to investigate underground structures.

But Iraq’s long isolation from the rest of the world meant that the data had never been analyzed with the latest technology, Mr. Bayati said in the interview, which was attended by his chief geologist and another ministry expert on reservoirs and authorized by the oil minister, Hussain al-Shahristani.

It was partly for that reason, Mr. Bayati said, that Iraq allocated up to $25 million each for agreements with some 40 international oil companies, which have provided training, legal consulting, and technical help -- including access to the latest software -- with the data analysis. In the process, “We got some pleasant surprises,” he said.

A re-examination of one series of wells running from Taji, just north of Baghdad, to an area southeast of the capital nearly doubled the estimate of recoverable reserves after raising the estimated total to around 15 billion barrels, Mr. Bayati said.

That is one of a series of similar structures in Sunni areas north of Baghdad that are still being studied, he said. Current estimates for all proven reserves in Iraq amount to about 115 billion barrels, according to numerous industry and government analysts in Iraq and the West.

Mr. Bayati said that the studies, which were conducted across the whole country, also increased estimates of the natural gas reserves in Sunni-dominated Ninewa and Anbar Provinces in the west. He said that the amount of natural gas that could theoretically be extracted from the Akkas field alone would be the energy equivalent of around 100,000 barrels of oil a day.

In the past, some Western oil experts have speculated that as much as 100 billion barrels of additional crude oil could be found in deep formations in Anbar, but investigating those structures would probably require new seismic testing with equipment on the ground, a difficult task given the dangers of working in Iraq at the moment.

Akkas is expected to be among a small number of fields to be given priority in Iraq’s development plan once the oil law is passed.

Although Mr. Bayati was initially reluctant to discuss the political implications of oil and gas reserves in Sunni territory, he eventually conceded that the impact was likely to spread beyond the arcane world of oil engineering. “Eventually one has to deal with reality on the ground,” he said.

The work has not gone unnoticed elsewhere in Baghdad.

“It could be a real positive,” a senior United States official said about the Akkas field. “There are people who believe it could be quite large.”

The official said that more work needed to be done, including new seismic measurements to better map the fields.

The potential of the gas fields has also caught the attention of some in the American military command, including General Allen, who believes that the natural gas could be used to generate electricity and serve as a raw material at chemical plants in Anbar.

The promise of the oil and gas fields in Sunni territory comes with numerous cautions, including the challenges of doing almost anything with the fields as long as Iraq remains such a dangerous place to work, particularly for foreign companies with substantial expertise.

Even if companies can develop the fields, it could be years before the necessary wells can be dug and pipelines built to move the oil and gas from the fields.

But the novelty of oil resources on Sunni territory has certainly caught the fancy of those the finds could affect the most. Farhan T. Farhan, the mayor of Qaim, which is the nearest populated area to Akkas, said in an interview that he already had his eye on the possible economic benefits of developing the field.

“If we use this petroleum,” he said, “it will be enough for all the west of Iraq.”

2.

DRAFT LAW ON OIL MONEY MOVES TO IRAQI CABINET
By James Glanz

New York Times
February 19, 2007
Page A6

http://www.nytimes.com/2007/02/19/world/middleeast/19law.html

KARABILA -- A draft version of the long-awaited law that would govern the development of Iraqi oil fields and the distribution of oil revenues has been submitted to Iraq’s cabinet, the first step toward approving the legislation, two members of a senior negotiating committee said this weekend.

The move seemed to signal that negotiators had arrived at the outlines of a compromise that would satisfy the Kurdish, Shiite, and Sunni members of the committee and break a deadlock that has held up approval of the law for months. Because the Iraqi budget depends almost entirely on oil revenues, the law is considered an essential element of creating a stable and functioning government.

Earlier drafts of the law described to the *New York Times* indicate that Iraq’s central government in Baghdad would retain substantial control over oil revenues and the right to review the contracts that regional governments sign with Iraqi and international companies to develop the fields and to pump oil.

Negotiations had snagged because of the insistence by the Kurds that they maintain a degree of autonomy in managing their northern fields. But two members of the negotiating committee confirmed that a draft had been sent to the cabinet, indicating that a compromise might be in sight.

Neither of those negotiators -- Hussain al-Shahristani, the current oil minister, and Thamir Ghadban, a former oil minister -- provided details of the compromise. But a senior official in the Kurdish regional government also said that a deal was near and hinted that the Kurds had received concessions on how the law would affect existing contracts with oil companies that agreed to work in the north.

If the cabinet approves the draft law, it would then be sent to Parliament for ratification. Parliament for the most part automatically passes laws that have been approved by leaders of the main political parties, which run along ethnic and sectarian lines.

--Qais Mizher contributed reporting from Baghdad and Yerevan Adham from Iraqi Kurdistan.