By: Jonathan Guthrie
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A new land of opportunity opens up every so often. Darien, Tanganyika and Iceland spring to mind. Iraqi Kurdistan is this month’s, though with greater justification than the previous three. Oil explorer Gulf Keystone Petroleum is ratcheting up activity there financed by a $200m placing and a proposed disposal valued at $300-$350m. A fortnight ago Vallares, the vehicle of Nat Rothschild and Tony Hayward, announced that it would merge with Genel, a Turkish oil group active in the region.
Kurdistan’s estimated 40bn barrels of oil is relatively easy to extract. But it was politically out of bounds during the reign of Saddam Hussein, whose repressions included gassing the town of Halabja. Following his overthrow, oil majors remained reticent because Baghdad politicians threatened to blacklist businesses that signed exploration licenses with the semi-autonomous Kurdistan Regional Government.
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That created an opportunity for independents with no interests in Southern Iraq’s mature oilfields. GKP, for example, has access to Kurdish reserves stretchily estimated at 4.8-10.1bn barrels. It is raising cash to step up exploration and appraisal work.
But if you are planning to pawn your fob watch to buy into the Kurdish oil boom, hold hard. Baghdad and the KRG are edging towards a revenue-sharing deal. But they have not concluded one. The political risks taken on by resources investors remain substantial. Meanwhile, the long-suffering Kurds are shouldering the concomitant peril of a “resource curse”. Counter-intuitively, energy riches can retard development and democracy rather than promoting them.
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