South Korea's state oil company said Thursday it signed an agreement with Iraq's Kurdish regional government to drill for oil in exchange for social infrastructure investment.
The Korea National Oil Corp. and Prime Minister Nechervan Barzani of Iraq's self-ruled Kurdish region signed the deal in Seoul, KNOC said in a release.
Under the terms, KNOC gets the right to drill for oil in eight locations, or blocks, in the Kurdish region. In return, KNOC will pursue power plant and sewage facility projects worth an initial US$600 million.
KNOC will carry out another US$1.5 billion in projects provided it becomes possible to export oil from Iraqi Kurdistan, the release said. Thursday's deal follows preliminary agreements reached earlier this year.
Oil exports from the Kurdish region have been hampered by a dispute with the Shiite-led central government in Baghdad, which considers any deals signed by the Kurds illegal as Iraq has not yet finalized a new national oil law.
The Kurdish government has drafted its own oil and gas law and has pursued numerous deals with international oil companies.
Iraq has been unable to agree on a law to set rules for foreign investment in the oil industry and determine how revenues would be shared among Shiites, Sunnis and Kurds.
The country has an estimated 115 billion barrels of oil and some 112 trillion cubic feet of natural gas reserves, according to the government.
Resource-poor South Korea imports virtually all of its oil. Through the first eight months of this year, it imported a total of 576 million barrels, mostly from the Middle East, according to KNOC.
Imports from Iraq totaled about 31 million barrels.
