Thursday, October 18, 2007

Heritage Oil: Kurds & Turks, Lake Albert - Africa and the Middle East

A recent story showed up on the Globe & Mail about a dynamic company that is exploring in some parts of the world where many people would shy away from. This company, is Heritage Oil. Though small, they are working in Uganda, Oman, Russia, DR Congo and Iraq.

As you can see in the story mentioned in the Globe & Mail Heritage Oil is caught potentially in the crosshairs of the Kurds and the Turks. There has been talk of Iraq splitting into three distinct regions: a North, a Centre, and a South, based on religious lines and views. The northern portion (which is mainly occupied by Kurds) is a region that has significant oil and gas potential in all of Iraq.

A note from Wikipedia, shows that the Kurds are "According to the CIA Factbook, Kurds comprise 20% of the population in Turkey, 15-20% in Iraq, perhaps 8% in Syria,[41] 7% in Iran and 1.3% in Armenia. In all of these countries except Iran, Kurds form the second largest ethnic group. Roughly 55% of the world's Kurds live in Turkey, about 20% each in Iran and Iraq, and a bit over 5% in Syria.[42]. These estimates place the total number of Kurds at somewhere between 27 and 36 million."

With the above statistics you can see these are a people who are spread among 5 different countries, each country having their sets of laws and beliefs. Even when I worked in Algeria, many years back, there was talk about the Kurds and how essentially their country (Kurdistan) was broken up and divided (colonialism - British, French, etc.), much like Africa; divided up based on Geography, rather than Culturally (as in tribes) - hence maybe a reason for much of the turmoil we see in both these regions.

What brings a small company into the crossfire? The Turkish government recently announced that they have approved military strikes against Kurdish separatists operating from northern Iraq.

Earlier this month, Heritage announced it had reached agreement with the Kurdistan regional government that would eventually produce 20,000 barrels of oil per day. The company is also planning to build a refinery to process the crude, in a 50-50 joint venture with the Kurdish government.

As it also happens, the Kurds living in Turkey have been taking refuge in Northern Iraq, hence the proclamation from Ankara.

If this were not enough for Heritage Oil to handle, a recent release from AFP shows that even Lake Albert (which separates DR Congo and Uganda) has been more than peaceful ever since oil was found beneath the lake.

Quoting the AFP story:

"In a statement, Heritage said its vessel was "within Ugandan waters in Lake Albert in the process of lifting cables to mark the completion of a seismic survey" when a UN patrol boat detained the ship and its crew.

"This was a routine check, not hostile, and there was full co-operation. After a short interview at shore, the vessel and crew were released and returned to base in Uganda," Heritage said.

The clash between border forces was a "separate, unrelated, isolated incident," it added. "No employees or sub-contractors of Heritage were involved."

Tension between the two Great Lakes nations has shot up since August 1 when Uganda accused DRC troops of killing a British engineer exploring for oil on the Ugandan side of Lake Albert."

There is always easy oil (say in countries like Canada, Norway, the UK) and then there is difficult oil to find, extract, refine, and produce and export, like the type Heritage is after. As I've said in previous posts, it is small companies like this one that are leading the way and willing to take the risk.

Being an adventurer myself (having worked in Africa), this is the type of company I like working for - ambitious and willing to take on a challenge. Yet handle the challenge with tact, experience and an understanding of the environment they are working in.

In oil and gas exploration, you have no control over where the oil is found or the politics - but you have to have the drive to want to build a successful exploration program, based on risks and in many cases based on the unknown. The major unknown is people - who can predict what will happen on a political level? No one.

This will be an interesting story to watch and see how it plays out.

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