Brits who are cashing in on Kurdish oil
TWO British companies are likely to do very well from the chaos caused by Isis fighters rampaging through Iraq.
In December last year, British firm Genel Energy, led by ex-BP boss Tony Hayward, completed the KRI (Kurdish Region of Iraq) pipeline from the Kurdish area of northern Iraq to Turkey, where oil and gas can be sold to international markets via a deep sea port. For his part in the thirsty work of completing the pipeline, Hayward, who left BP after a string of gaffes during the Deepwater Horizon oil spill, trousered £1.78m in pay and bonus, together with his shareholding of £16.3m.
Genel has also found oil in the Kurdish north and this year hopes to make serious money by beginning to export it through its new pipeline. Alas, the fly in the ointment is Iraq’s 2007 oil law, which created production sharing agreements between the major oil companies and Baghdad and obliges exporters to obtain consent from central government, as well as to pay taxes.
When Baghdad refused consent for Genel’s planned exports, the firm went ahead anyway, pumping two loads of Kurdish oil through the new pipeline to a waiting ship in Turkey - before Baghdad’s oil ministry stepped in with an arbitration suit to stop it being sold on world markets, effectively placing the shipments in limbo and thwarting Genel’s plans.
Genel’s efforts to operate out of the separatist and better organised Kurdish north may be helped by crumbling central authority in Baghdad. If matters degenerate to the point where Iraq breaks up, it opens the way for a Kurdish state to allow oil to be pumped through the pipeline and sold on international markets with sizeable profits for Genel and without the inconvenience of dealing with Baghdad.
A second British company in the area, meanwhile, is Gulf Keystone, marshalled by Lord Guthrie, former SAS colonel and once Tony Blair’s favourite cutthroat. Guthrie served as chief of defence staff from 1997-2001; a year before leaving office he was already on the books of Gulf Keystone. The firm has invested in oil wells since 2000 solely in Kurdish north Iraq and now owns four sites which recently became productive. All Gulf Keystone needs is access to Hayward’s pipeline and sufficient security to get the oil out. Humungous profits may await.
Both these British companies have benefited hugely from improved stability in the northern Kurdish region following the 2003 invasion of Iraq. But when profits flow in for the pair, very little will end up with the exchequer. Gulf Keystone is traded on the London Stock Exchange but registered in Bermuda; Genel Energy is based in Jersey and paid less than 1 percent tax on company profits to the exchequer in the last financial year.
Quite apart from the human cost, a recent book by the Royal United Service Institute conservatively estimated the financial cost of the Iraq war to UK taxpayers at £9.56bn. It will be interesting to see if the Chilcot inquiry into the war focuses on energy interests in the region in the run-up to the 2003 invasion, or solely on Blair’s simpering relationship with his American counterpart, George W Bush.