By Kim Hyun-cheol
Staff Reporter
A South Korean consortium signed an oil contract with Iraq's autonomous Kurdish government but its outlook still remains questionable as the central Baghdad government opposes such ``independent'' deals.
The Ministry of Knowledge Economy announced Wednesday the consortium led by the Korea National Oil Corporation (KNOC) signed the deal with the regional government Saturday for developing eight oil blocks in northern Iraq, which have an estimated 7.2 billion barrels of reserves.
They will be given 60 to 80 percent of the production in two blocks, while having 15 to 20 percent of stakes in the other six. If the exploration project goes well, the consortium will secure some 1.9 billion barrels of the whole reserves, it said.
The state-run KNOC signed an MOU with the Kurds in February, when Nechirvan Barzani, the prime minister of the Kurdish autonomous government, visited South Korea. Earlier, SK Energy, the nation's no.1 refinery, signed another deal with them last November.
This time, however, the number of secured oil claims doubled and the total reserves amount also rose 1.5 times from the February MOU, making it the biggest South Korea secured through an overseas oil exploration deal, the KNOC said.
Another consortium of seven Korean construction firms will participate in the $2.1-billion public infrastructure development project of the Kurd region.
Seoul's ambitious bet on the oil project, however, may face obstacles due to Iraq's unstable political situation.
South Korea has little niche to muscle into southern Iraq, the nation's biggest oil region, as major global players like British Petroleum, Chevron Corp., Exxon Mobil and Royal Dutch Shell have already monopolized most of the oil mines there.
Sources familiar with the issue also say the pro-American stance of the Lee Myung-bak government also affected the ties with the Kurds, an ally to the United States during the Saddam Hussein regime.
The current Iraqi constitution defines the central government as in charge of the country's oil production and profit allocation, but the Kurdish government has been demanding an autonomous right over the oil fields in their region.
In defiance of the central government's warning, the Kurdish government has signed several oil deals with global companies over the past couple of years.
The Iraqi Oil Ministry in April ruled out the KNOC consortium, which included SK Energy and GS Holdings, in a bid qualification for a future development deal for one of the world's biggest oil gas fields in northern Iraq, while another consortium of four Korean companies led by the Korea Gas Corporation made it.
An expert warned of risk for the deal, though still praising the government's adventurous efforts to secure oil reserves overseas.
"It is quite bold and risky to sign the deal with the Kurdish government as long as nothing has been confirmed yet over the right to control the oil fields in the country," said Seo Jeong-min, professor of the Hankuk University of Foreign Studies.
There are also positive signs on Seoul's move in that the central Iraqi government is coming to terms with the Kurds.
Ha Chan-ho, South Korean ambassador to Iraq, said the governments are inching toward narrowing differences over the deal.
"They are now in a fine-tuning stage nearing a huge accord as far as I know,'' the envoy said.
Kurdish Premier Barzani plans to meet soon with Iraq's Prime Minister Nouri al-Maliki to get understanding on the Korean deal, the MKE said.