Monday, Sep 10, 2007

   (From THE WALL STREET JOURNAL) 

   By Neil King Jr. 

WASHINGTON -- Hunt Oil Co. and the Kurdish government defended an oil-exploration agreement as good for all Iraq, despite apprehensions within the U.S. government that such regional oil deals could sap efforts to strengthen Iraq's central government.

Closely held Hunt Oil, of Dallas, and the Kurdish regional government said Saturday they had signed a production-sharing contract for petroleum exploration in the Kurdistan region of northern Iraq.

A senior State Department official said the move had taken the U.S. government by surprise. Earlier this year, the official said, the State Department sat down with major U.S. oil companies "to say that it was not a good idea to cut oil deals with the Kurdish regional government."

The official said that the message "was basically informal" and that the Bush administration had no leverage to block such deals.

Jeanne Phillips, a spokeswoman for Hunt Oil, said the company didn't participate in any discussions with the U.S. government. "We are a private commercial business," she said. "The Kurdish regional government was ready to go, and we were ready to go, and we took advantage of that."

The Hunt Oil announcement came as the Bush administration has been trying to make the case that despite the violence and sectarian strife, Iraq is moving toward some eventual political reconciliation. One key indicator of that -- a draft petroleum law designed to spur foreign investment nationwide -- has languished in Iraq's parliament.

Iraq's oil minister, Hussain al-Shahristani, said that the Hunt deal was illegal. "Any oil deal has no standing as far as the government of Iraq is concerned," Mr. al-Shahristani said as he arrived for an Organization of Petroleum Exporting Countries meeting in Vienna.

Qubad Talabani, the Kurdistan regional government's permanent representative in Washington, defended the deal as "exactly the sort of investment that Iraq needs right now."

Mr. Talabani said he would be "naturally disappointed" if the U.S. government was advising against such deals. "I would think that the U.S. government would be actively encouraging companies to invest in Iraq's natural resources," he said.

The Hunt deal, he said, is only one of a series that the regional government hopes to sign going into next year with other oil and gas companies. "This should send a message that Kurdistan is open for business," he said. "There are many other blocks that are open for negotiation."

Mr. Talabani said that the deal wouldn't conflict with any future national oil law because once the Hunt project begins to pump oil, the revenue-sharing rules would be in place. "There is no doubt that there will be revenue sharing throughout the country," he said.

(END) Dow Jones Newswires

September 10, 2007 19:53 ET (23:53 GMT)