Why it's time for Iraqi Kurdistan's oil sector to move on from the legacy of Ashti Hawrami

Ashti Hawrami served as Iraqi Kurdistan's first minister of natural resources. Reuters

Probably the most important person outside the two leading families in the modern history of the Kurdistan region of Iraq, Ashti Hawrami, died in London last week, aged 76.

Formally named Abdullah Abdulrahman Tawelayi, Dr Ashti, as he was usually known in the oil industry, had been suffering from cancer. He was the first minister of natural resources from May 2006 to July 2019, based in the regional capital Erbil, then assistant prime minister for energy affairs until 2022.

Born in the Kurdish city of Sulaymaniyah in 1948, he obtained an engineering degree from Baghdad University in 1971 and a doctorate from the University of Strathclyde in Scotland in 1978, then worked as an engineer and oil consultant in the UK until returning to Iraq in 2006.

When he was appointed, the Kurdistan region’s only oil production came from the Khurmala dome, the northerly extension of the large Kirkuk field, most of which lay within areas controlled by the federal government in Baghdad. In a few years, he oversaw the semi-autonomous region’s rise to a global oil and gas hotspot, profoundly influencing Iraq’s post-invasion politics.

He made several crucial decisions that contrasted sharply with the management of Iraq’s federal oil sector. He offered production-sharing contracts to international petroleum companies, which provide them with a portion of the oil they produce, rather than the fee-based technical service contracts favoured by Baghdad. He recognised that Kurdistan, much less explored and lacking well-established fields, needed to be more investor-friendly than the politicised and bureaucratic processes in southern Iraq.

The Bai Hassan oilfield, west of Kirkuk. AFP

As a result, Norwegian company DNO was able to start production from its Tawke field in the north of the region in 2006. Taq Taq, operated by Turkish-UK Genel Energy, started up in 2007, while Khor Mor, held by a consortium including Sharjah-based Dana Gas and Crescent Petroleum, began producing in 2008. It was the first field in Iraq to produce gas not associated with oil and is still the country’s largest gas producer.

These successes encouraged a rush of companies to explore the region, historically alternately neglected and persecuted by the former regime in Baghdad. Other significant oil and gasfields were discovered up to 2014.

The minister, in combination with the region’s then-president Masoud Barzani, built a strong relationship with Turkey, helping to ease Ankara’s traditional suspicion of Kurdish political movements. In 2013, a pipeline was completed through Kurdish territory to link to the Iraq-Turkey pipeline, which enabled oil exports to reach the Mediterranean directly.

Mr Hawrami was respected by counterparties as a tough negotiator, and admired by his staff as a meticulous and inspirational leader. But his tenure was tempestuous and marked by controversy, within and without. His famous briefcase was said to hold all the crucial documentation on the sector, known to very few. His policy spawned a major, long-running and still unresolved dispute with Baghdad over the constitutional and legal rights of the Kurdistan region to produce, export and sell its petroleum and use the revenue thereof.

The federal government launched legal proceedings to capture tankers carrying crude from Kurdistan on the high seas, while Mr Hawrami dealt with traders willing to accept the high risks in return for discounts.

In his greatest coup, in 2011, he attracted ExxonMobil to take up six blocks in the region, with the Houston-based oil major acting contrary to official US policy. It already held major assets in federal areas of Iraq, and its deal was contrary to Baghdad’s “blacklisting” of companies that contravened its opposition to Kurdistan’s independent oil sector.

The minister spoke of Kurdistan having 45 billion barrels of reserves and reaching 1 million barrels per day of production, which would have been more than Azerbaijan.

The money and geopolitical attention from oil exports was crucial in enhancing the Kurdistan region’s economic boom and autonomy. When Iraqi forces faded in the face of the onslaught of the terrorist group ISIS in June 2014, the Kurds’ Peshmerga military took control of the city of Kirkuk. As well as the symbolic and historic importance of the city to Kurds, its surrounding oilfields, the original heartland of the Iraqi oil industry dating back to 1927, came under Erbil’s control, boosting production and revenue.

A deal with Russian state company Rosneft in February 2017 seemed to bring Moscow’s blessing and open the way to gas exports to Turkey.

But that September, despite opposition from Baghdad and almost every concerned outside power, including Turkey, Iran and the US, it held an independence referendum, which passed overwhelmingly. The federal government responded by seizing back control of Kirkuk against very little Peshmerga resistance. Without these territories and their oil output, independence was not a viable prospect.

This setback was accompanied by geological disappointments. The complex folded area of the Kurdistan mountains proved to be much more complex than first anticipated, few significant discoveries were made after 2014, and reserves and production at several important fields, notably Taq Taq, plunged. The sharp downturn in world oil prices in late 2014 did not help.

Companies grew frustrated with Mr Hawrami’s growing absences at his home in Henley-on-Thames near London, protracted and unexplained delays in approving new projects, and swelling payment arrears. Several initiated arbitration proceedings over alleged breaches of their contracts. Gulf Keystone, a UK-listed company which had found one of the largest fields, was able to get paid, reportedly through the connections of Baghdad-born Nadhim Zahawi, later the UK’s chancellor of the exchequer, with Mr Hawrami.

ExxonMobil relinquished its final asset in Kurdistan in April 2022, having not found anything sufficiently attractive. French major TotalEnergies sold out in September that year, and US firm Chevron in August last year, leaving the remaining fields in the hands of smaller companies.

Mr Hawrami faced corruption allegations on several occasions, relating to payments for oilfield rights, connections to illegal insider information, and complaints by Kurdish parliamentarians of improper oil trading. In 2022, he brought a case in the UK against two journalists whom he accused of defaming him, the court finding in his favour this August.

Oil earnings solidified the political position of his patrons, the Barzani family, long-term leaders of the fight for Iraqi Kurdish autonomy and independence. In the region’s latest elections, held on the day Mr Hawrami died, the Kurdistan Democratic Party, led by Masoud Barzani, remained the largest force in parliament, with the rival Patriotic Union of Kurdistan in second place.

Without Mr Hawrami’s leadership, the Kurdish oil sector would probably have been neglected by Baghdad, and the region would have struggled to assert its autonomy. However, oil and gas activity has stagnated, and since he left office, Baghdad has intensified pressure on Erbil and its independent oil sector, declaring it unconstitutional and prolonging the closure of the export pipeline through Turkey.

For all the minister’s achievements, it’s time for Kurdistan to move on from his legacy.

Robin M Mills is chief executive of Qamar Energy, and author of The Myth of the Oil Crisis