The Kurdistan region of Iraq has been seeking international oil relationships ever since the collapse of Saddam Hussein’s regime in 2003.
The Kurdistan government is an autonomous entity of Iraq, separate from Baghdad. And the region has attracted the attention of Western companies.
U.S. oil giant Chevron Corp. (NYSE: CVX) will be purchasing a majority share in two Kurdistan oil exploration blocks soon, the company announced Thursday.
Kurdistan has had a fairly rich recent history in terms of oil discoveries. Alex Munton, a Wood Mackenzie analyst, explained to the New York Times that Kurdistan has been the site of almost 20 discoveries amounting to some 8 billion barrels of oil and gas—and that’s just since 2005.
Kurdistan has historically been opposed to Baghdad, so when Exxon Mobil (NYSE: XOM) became one of the first Big Oil companies to sign exploration contracts in 2011, Baghdad immediately issued loud criticism and banned Exxon from operating within Baghdad territory.
Baghdad authorities claim Kurdistan requires their approval for such operations, but the governments of the two regions have been at odds and no agreement has been hashed out yet.
It is worth considering that Chevron has historically taken a safe approach to its operations, yet they have risked enraging Baghdad over operations in Kurdistan.
The area now features all kinds of big name companies including Marathon Oil (NYSE: MRO), Hess (NYSE: HES), and Genel Energy (LON: GENL).
A large part of Kurdistan’s attraction is the government’s willingness to court oil companies. Companies stand to earn between $3 to $5 per barrel (far more than elsewhere in the region).
Of course, there is the specter of Baghdad looming over it all, since getting the oil out of Kurdistan requires either an Iraqi pipeline or a truck route to Turkey. And pipeline exports are currently stilled due to the ongoing Kurdistan-Baghdad dispute over money matters.
Chevron’s new acquisition in Kurdistan is a 490-square-mile set of two blocks on terms rumored to be between $200 to $300 million for 80 percent ownership.