A cable from the US Embassy in Baghdad, recently released by Wikileaks, shows US officials warned Hunt Oil Company days before signing the Dallas-based independent signed its 2007 production-sharing contract with the Kurdistan Regional Government that the license area was not totally inside Kurdish territory.
"Comments by Hunt officials indicate that the block is actually in the Ninewa Governorate's northern administrative districts," said the cable, dated Sept 12, 2007, four days after the Hunt contract was signed and seven days after a meeting with officials of the Regional Reconstruction Team, the embassy's KRG arm.
"Considerable legal ambiguity surrounds the PSC with Hunt Oil, as the districts in northern Ninewa to be explored by the company are classified as "disputed territories" under the Iraqi constitution," the cable said.
"A senior Hunt Oil manager told RRT Erbil's Team Leader that northern Ninewa province has significant potential for oil production, and that this factor trumps the legal ambiguities and risks associated with the company's PSC with the KRG."
The warning, passed on in a meeting with visiting Hunt officials in Erbil, capital of the Iraqi Kurdish semi-autonomous area, also said that the deal was legally questionable without a new oil law or agreement between the KRG and the central government in Baghdad.
The KRG has signed more than 40 production-sharing contracts, despite objections from Baghdad which insists it has the sole right to sign contracts.
The deal with Hunt Oil, whose owner Ray Hunt was at the time on the US President's Foreign Intelligence Advisory Board, was the first after the KRG passed a regional oil law, and the third of seven such oil or gas deals at least partially outside the UN-recognized territory of the KRG.
"(U.S. government) policy has discouraged companies from signing oil deals with the KRG until Iraq enacts its national hydrocarbon framework law, as such regional contracts could act as an impediment to negotiations toward a comprehensive national settlement that equitably distributes Iraq's oil wealth. Such contracts also remain subject to significant legal ambiguity," the cable said.
"This has not deterred Hunt Oil and the other handful of companies that have signed PSCs with the KRG. Their concerns about the nebulous political environment and possible eventual dissolution of their PSCs have been overridden by the prospect of huge profits - from getting first access to the choicest oil exploration fields in northern Iraq, and from establishing productive relationships with key KRG and central government officials."
The disputed territories are a legacy of ethnic cleansing and gerrymandering by Saddam Hussein, and are supposed to be settled by a census and then referendum to determine the fate of governance of the territories. Most are already under Kurdish administrative control due to the ethnic makeup of the areas.
