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Speakers
H.E. Masrour Barzani
Prime Minister, Kurdistan Regional Government
Adel Chaouch
President, CEO, and Director, ShaMaran Petroleum Corp.
Jon Harris
CEO, Gulf Keystone Petroleum
Bill Higgs
CEO, Genel Energy
Majid Jafar
CEO, Crescent Petroleum
Ross Perot Jr.
Chairman, The Perot Group
Moderator
Eithne Treanor,
Managing Director, E. Treanor Media
EITHNE TREANOR: Now, we’re very honored at this time in our program to have with us a very distinguished gentleman who’s going to begin and set the framework for our discussion. We’re going to be talking about “Energy Development, Exports, and the Future of the Kurdistan Region of Iraq” when it comes to energy. So very, very important region. Some focus there at the moment.
And we’re absolutely delighted, and I’d like you to give a wonderful Atlantic Council welcome to, the prime minister for the Kurdistan region—the regional government, His Excellency Masrour Barzani, is with us. Please welcome Masrour Barzani. Thank you, Your Excellency. Lovely to see you.
PRIME MINISTER MASROUR BARZANI: Salaam alaikum. Ministers, distinguished guests, ladies and gentlemen, good afternoon. I’m honored to be here with you all today to talk about the future energy potential of the Kurdistan region of Iraq. I carry with me the good wishes and appreciations of my people. I take particular pleasure in giving this address from a place in which the forebearers of many of you here had an extraordinary vision to build a state that would provide for its citizens and act as a beacon to the world. Fifty years later, the UAE has achieved both. Your country is a powerhouse of our region, where leadership has wisely harnessed the natural resources and the abundant talent of its people. At each step of your journey, sustainable use of energy has been forthright. No other country in the world has been as effective in making energy a nation-building pillar.
I want to begin by thanking UAE Energy Minister His Excellency Suhail Mohamed Al Mazrouei and Atlantic Council President and CEO Frederick Kempe for the invite to this timely summit, and to the organizers of making this event possible and bringing us together here.
I stand before you today at the culmination of a week-long visit to the Emirates, I am here the second time in less than a month to foster a serious relationship with the United Arab Emirates and to learn from you. At each step of my visit, I have had highly informative discussions with leaders and elders. It is clear to me that we share a common vision. We are bound together by a shared set of values. We protect and serve our people, while at the same time offering sanctuaries to others. We are also outward-facing, proud members of the global community, who are determined to provide for a better future.
Throughout these past years, we in Kurdistan have watched and learned from your experience in the UAE as you have navigated a series of obstacles. And our energy is a hopeful one. We have gone from almost a standing start when we passed our oil investment law 15 years ago to a region that produces and exports around half a million barrel of oil per day and also produces almost half a billion cubic feet of gas per day, with the potential to grow both of these further. But this hasn’t been an easy journey.
Sectarian tension in parts of the country, the rise and fall of the Daesh terror group, which we played a lead role in defeating, political uncertainty in Iraq, and lately a grave injustice inflicted on us by a so-called federal court judgement, have all taken a toll. But we, as a people, have prevailed. And it is my vision that we will go on to prosper. Efficiently and wisely harnessing our energy capacities have been central to our future. And my government has made doing just that a strategic priority, which I believe will sustain Kurdistan in perpetuity.
Our future will be built on energy, both that of our people who have earned their time to shine, and through the sustainable development of a natural resource that we, as Kurds, have been working towards through decades of war, pestilence, insurrection, and other impositions. We have now reached a point in our history where we stand ready to build on all our sacrifices. We have a tremendous opportunity to provide for both our domestic and global markets. And we are determined to transform Kurdistan into an energy hub of our region.
So what are we doing about it? My government’s energy strategy is based on two pillars. My first responsibility is to meet the growing demand and aspiration of my people. In the decades since the inception of Kurdistan, demand for energy has soared. Families have bought more cars and houses. Public services have penetrated deep into the countryside. And for the first time, our capital, Erbil, is on route to becoming a regional hub for business and investment.
The last three years have been transformational for us. We have implemented global best practice policies in parts of our public sector and have taken measures to ensure that the plight of all reform programs, inertia, is kept at bay. We have slashed red tape in order to drive a private sector. We are encouraging entrepreneurship and rewarding creative thinking. We have digitalized parts of our public interface with institutions, a move that has slashed opportunities for inefficiencies and corruption. We are implementing banking and tax reform that will remove needless obstacles for investment and innovation.
Growth is an essential path of our destination. My government has announced several major economic and industrial zones. But we have a long way to go. And even as expand our capacity, we are being held back by our inability to meet the energy needs of some of our local authorities and partners. Demand for gas, for instance, is already more than double current production rates. This is not the situation we want to be in, and it is one we are taking urgent steps to address.
Recently the United States has recognized the potential in our gas sector and have particularly—have partially financed efforts to increase production. I know some of our partners here today have already been in talks with my government and local authorities to help bridge all the temporary gaps. We continue to invest in more power plants and renewables to power our future. And at the same time, we continue to develop an export potential. I’m confident that Kurdistan will soon become an important source of energy for the world’s growing demand.
We will become a net exporter of gas to the rest of Iraq, Turkey, and Europe in the near future, and help meet their energy security needs. Already we have an export oil capacity which acts as an essential economic lifeline for us and a vital potential supply for our partners. I’ve also had talks with the federal government of Iraq, Turkey, and the Gulf countries about the regional railway network. I believe that this could be transformational for Iraq and the region, creating new trade routes and another window for regional cooperation.
To meet his agenda we will need help, the support of our friends, many of whom are here in this room, and the courage of our partners to overcome their inhibitions. A strong, economically independent Kurdistan is no threat to its neighbors or to our partners in Baghdad. In fact, it is the opposite. We have demonstrated time and again our strength of purpose and our loyalty to our friends. We are a people of our word. If we act as a united front, the challenges that affect us all can be mitigated. We can, and will, help countries of our region and beyond meet their energy needs, as well as consolidating our own society.
As we continue to develop our oil and gas potential, we will retain a focus on renewable. The shift towards renewable energy is both a noble cause and an economic necessity. Renewable energy costs have fallen year on year. Governments have increasingly encouraged, and in some cases financed, the pivot to renewables. But I also remember—I also remember well that over a decade ago analysts warned that oil-dependent states and governments would be condemned to economic freefall, lest they pivot to renewables—that it was now or never to wean off oil and gas. They even had a name for it, the end of the fossil fuel era.
And yet, today a conflict on the European continent has exposed the fallacy of that prediction. I should make it clear in this forum that we in Kurdistan have the capacity now to make up for at least some of the shortfalls of oil in Europe, if our partners in Baghdad are prepared to work with us. So today I want to be realistic about our needs and cautious in our assessment. I have no doubt that oil and gas will remain an essential part of the energy mix of the foreseeable future. And although I recognize that we will inevitably wean off dependence on an exclusive source of revenue and growth, it will not happen overnight.
That aside, my Cabinet has been taking constructive steps to diversify our economy in a way that gives us a buffer against the uncertainty of global energy prices. We are drafting legislation for new industries and creating a regulatory environment to incentivize local companies and authorities, and to create competition. The diversification, focused principally on agriculture, manufacturing and services sector will be in addition to our energy sector, not an alternative. At the same time, we are taking tangible steps to improve the efficiency of our energy sector.
We and much of the world need to get smarter about how we use oil and gas. Last year, we issued a directive to all oil companies operating in Kurdistan region to end gas flaring. I know many of the CEOs are here today. And I thank them for the leadership and commitment to protect local communities and the environment for future generations. We’ve already opened our first plant that now captures flared gas, helping much needed electricity to local communities. We have announced small solar-based investments. And I was especially pleased recently to see big Kurdistan companies invest in solar farms in remote villages. In hydroelectric, we are investing in small and big dams.
These projects signal our determination towards a greener future, but also the recognition of the growing energy demand. Our two benchmark energy policies, more efficient use of existing oil and gas resources and development of renewables, are great opportunities for international investors. My government is keen to welcome investors who can bring expertise as well as finance, and who are looking for a long-term relationship.
Before I end, I know there are many friends and partners here from the oil and gas sector in Kurdistan. And I know that no pitch would be complete without assurances to you. I would like to reiterate to you all that my government remains committed to the contracts that have been signed between us. The contracts are in line with our oil and gas line, and the Iraqi constitution. And they are a bedrock of our shared future. The sanctity of the contracts are just as important to my government as they are to you. These have been reaffirmed by world-leading legal experts and international courts.
We continue to do all in our power to protect them. Investors in Kurdistan have the right to receive regular payments. Ensuring this happens is a core focus of my Cabinet, which will clearly help secure future investment. We value the investment and partnership of all the energy companies who are in Kurdistan. I know you have maintained commitment through the challenges. That’s why economic diversification is crucial to also help us in government provide certainty in cashflow to our investors and IOCs.
We in Kurdistan have long sought mechanisms for the federal distribution of oil and gas, for the oil and gas revenues across all of Iraq. That’s what the constitution calls for, and the only practical way forward for both Baghdad and us. I want to make one thing very clear about the recent ruling by a so-called federal court in Baghdad, which challenged our right to develop our oil industry. This ruling is unconstitutional and blatantly political. It does not pass the most basic of tests, and it has been made to pressure us, and delayed government information—the government formation process following federal elections last October.
Our friends and partners can see straight through this. We are talking with our partners in the federal government for an agreement that respects the constitution and our rights in it. This has always been our position. And as I have always said, we want to help the rest of Iraq, from Mosul to Basra, to prosper too. It doesn’t have—it doesn’t—it doesn’t have to always be a zero-sum game. It can be truly a win-win. After all, Kurdistan already provides electricity to other parts of Iraq and has the ability to further support the country’s energy needs.
But I want to assure each and every one of you, and our investors, that this ruling does not represent a real challenge to our investment potential. We are open for business, and we are very much looking forward to welcoming new partners to Kurdistan. In closing, I offer you, honorable friends and colleagues, a hand of true friendship. We have set the bar high for our region and beyond. You have offered us a lot to emulate. As we continue to build Kurdistan we will draw lessons from modern history’s most successful nation-builders. We are proud to call you partners and friends. And we look forward to welcoming you to our homeland just as warmly as you have accepted us into yours. Thank you very much.
EITHNE TREANOR: Your Excellency, thank you so much. Thank you so much for that very enlightening, very encouraging, and very pragmatic talk to address the issues that are there, issues that I know you clearly feel very personally passionate about. So thank you for sharing them with us. And it sets up the tone for this panel, which is wonderful too because we really now get to grips in terms of what’s happening here. And clearly your dear partners who are joining us here, people who are committed to the region, people who are businesspeople—so clearly they know what they’re doing. They’re not—they’re there for a good purpose. They’ve been there for several years. So we’re going to hear from them and, again, hear it played out, some of the great work that they’re doing.
So let me quickly introduce them. Just with me here is the CEO of Gulf Keystone Petroleum, Jon Harris. Lovely to have you with us. Bill Higgs joins us, the CEO of Genel Energy. Absolutely delighted to have with us Majid Jafar, the CEO of Crescent Petroleum. Ross Perot, Jr. joins us, chairman of the Perot Group. And we’re joined online also with Adel Chaouch, the president, CEO and director of ShaMaran Petroleum. So this is our great team. These are people who are working over the years, working hard in Iraq, so—in the Kurdistan region. And they will bring us up to date with what’s going on, particularly with their business.
Jon, if I may start with you. We look at the region. We’ve listened to the words of the prime minister. And again, tell us why you went to this region? Clearly there was a business case some years ago. You have stayed. And nobody is here for charity. You’re businesspeople. You have to—you have to provide energy. You also have to make money. So talk to us a little bit and bring us to what it has been for you.
JON HARRIS: Sure. Essentially, the region offered great opportunity. It had some—it was recognized that it had great petroleum resource, and we were lucky enough to get a license and explore, and find hydrocarbons, and produce it. Now, our production has been going there since 2013, but we’ve not fulfilled the true potential. And we’re very encouraged to continue to be a firm, strong partner for the—of the Kurdistan region. But we’d also like to essentially invest more and develop the potential of the field.
EITHNE TREANOR: But, again, you’re also looking at, what, 45,000 barrels at the moment? So—
JON HARRIS: Yeah, it’s currently producing 45,000 barrels a day. And we’d like to double that, essentially.
EITHNE TREANOR: Bill, again, you’re a publicly traded company. So you have shareholders to keep happy, and a lot happening in the region. But, again, give us a feel for perhaps some of the people who are here who may not know, you know, in terms of the production—the oil production that’s going on at the moment. What do you think?
BILL HIGGS: Yeah. I think it’s important. For Genel, we believe in Kurdistan. And it was excellent to hear His Excellency talking about how he sees the future for the industry, because I think it’s very—it’s very important to have that belief shared with others. We’ve been—we’re actually going to be celebrating our 20th year in Kurdistan later this year. So in fact, actually, we arrived before there was an export pipeline. We arrived before there was a hydrocarbon law. And we saw that—like Jon—we saw the opportunity to invest.
And we still see that opportunity to invest, and clearly see that this is a marketplace that provides the opportunity to produce very resilient barrels. And as His Excellency said, also barrels which are environmentally as friendly as they can be. And you’re doing it in an environment where they have a material impact on the benefits to the local communities and the society in which we work. So I think that—those three principles are what drive us to be in Kurdistan.
EITHNE TREANOR: Majid, we’ve seen, you know, an increase for Crescent Petroleum, what, 50 percent gas in the past few years. But also, you know, you’re planning expansion as well. So, again, clear reasons why you believe in this region. Please share it with us.
MAJID JAFAR: So we’ve had a great journey since 2007 when we started in the Kurdistan region. The whole of Iraq was really in turmoil. It was almost a civil war. It was quite challenging. There were no international contractors working to work there. The oil and gas law had just been passed, or actually after we entered. And we’ve seen a lot of progress, as His Excellency mentioned, up to half a million barrels of oil per day, thanks to colleagues here on the panel and others. Our focus has been on the gas side. We’ve invested so far with our partners and joint operators, Danas Gas, our affiliate, as well as OMV, MOL, and RWE, our partners in the Pearl consortium. So far $2.3 billion. We’re committing another $1 ½ billion of investment to double our production, again, in the next couple of years to fully meet the local needs.
And I think an important aspect that we touched on earlier today is the benefit of that gas beyond just generating the power, displacing diesel actually avoids 50 million tons, so far, of CO2 emissions. And that’ll be much more as we increase production. And in addition, the economic value-add. We had PwC do a report study for us. Over $20 billion of GDP economic value-add, and over $20 billion of fuel-cost savings for the host government. So huge benefits. And I think we were talking this morning that the role of gas doesn’t get enough credit for its benefit both to the climate and in terms of, you know, societal benefits and socioeconomic benefits.
EITHNE TREANOR: But clearly, it’s another area of focus and, indeed, an area of growth for you, for the country as well.
Ross, again, you began operations there in 2007 onshore, you know, in terms of oil production. Talk to me again about that production, how it’s growing and what your next plans are really.
ROSS PEROT, JR.: Yeah, Eithne, we were honored, like Majid, to start in 2007. And as Americans, you know, people say, why did you go to Kurdistan in 2007, because if you looked at it—it was in the middle of Fallujah. I mean, it was a very difficult time. And our team brought the idea up. And I said, well, let me call—I called Brent Scowcroft. And I said, Brent, General Scowcroft. I said, Brent, what do you think? I said, should we go there? He said, Ross, you need to be in Iraq. We need American business in Iraq. And if you go anywhere in Iraq, you need to be with the Kurds. These are our true allies of the United States.
And I met the prime minister back in 2007 with his father. And his father tells an amazing story, that—he said, when I met President Bush, I asked President Bush if I could be the 51st state of the United States. Which I thought was a wonderful story, and I said, well, that’s really nice. Well, then a few weeks later I’m having lunch with President Bush. And he says, Ross, where have you been? I said, I’ve been in Kurdistan. He says, that President Barzani—he said, Ross, he asked me to be the 51st state. So this is the relationship you’ve got between the United States and the Kurds, which we, as Americans, think is very important.
And that’s why we’re there. And that’s why we start on this adventure. And we’ve been very fortunate to have two large discoveries. And we’re at 31,000 barrels today. We’ll be at 55,000 barrels this summer. And we’ve got a pathway to double that to well over 100,000. So these are amazing on-shore oil fields. And for a Texan who’s been drilling in the Permian and areas like that, you know, to find a well—we’ve got a well that’s producing over 10,000 barrels a day, and it’s done it for almost a decade, and it’s not another 20 years of life left. And this is 39 API oil, so a very high-quality oil. These are fields that are difficult to find, especially onshore. And so this is a very unique spot in the world to find large reserves of onshore oil. And we’re excited to be there, we’re optimistic. And it’s been a tremendous business and adventure for our team.
EITHNE TREANOR: And this is, you know, the news I think that everybody wants to hear, and investors want to hear this in terms of getting results like this, particularly, I think, more for, yes, the public leaders, the companies, private operator. You know, it’s news you want as well.
Adel, let me bring you in here. Again, we’ve seen increase in production in terms of, you know, what you’ve been doing year on year, even despite the pandemic and despite uncertainty. Talk to us a little bit about how you’ve managed to ramp up the oil production.
ADEL CHAOUCH: Well, thank you, Eithne. I’m glad to be here. It’s such an honor to be in Kurdistan since 2007, along with our colleagues like Majid and Ross, Jr. Well, we’ve been very focused on a number of opportunities over the years in Kurdistan and matured the one that we have in conjunction and partnership with TAQA, actually one of the federal funds here of Abu Dhabi, and our focus has been on operation deployment. We’ve been very, very pleased that since 2017 till now we’ve been able to essentially increase production. And we have, as of September of last year, reached 50 million produced from that particular field.
Our intention is to continue to grow that field and continue to expand in Kurdistan. We see it as an area of growth. We’re very pleased and certainly very assured about the commitment of executive prime minister around the situation with Baghdad. And I think we’ll find further confidence in the ability to invest there. We early last year in conjunction with Total actually made a strategic decision to acquire their share in Sarsang, which is operated by our good friend Ross and his team there. And the intention is to basically significantly increase our footprint, our presence in Kurdistan, not only by organic growth and our asset entrance but also combining our efforts with the excellent operators like HKN and then doubling our size in the next, basically, few months.
EITHNE TREANOR: Well, you know, it’s good to hear a situation or sort of report almost from all of you in terms of the work that you’re doing and the ability to actually do that work. But, you know, if one looks at, you know, initial reports in the media, in the headlines, you know, it sounds like it’s not a great place to do business. Everybody talks about—the headlines are—you know, we’re hearing a lot more in terms of late payments. Nobody’s saying no payments, but there seems to be difficulties and challenges within it. You know, talk us through this in terms of how we’re looking at it.
Bill, you know, you’re a publicly listed company. Genel has got shareholders knocking on your door. They’re reading those headlines as well. We heard from His Excellency, the prime minister, there saying, you know, the sanctity of contracts. And this is a commitment coming from him. So, yes, there’s mixed messages, I’m sure. But you are the people on the ground. How, in reality, is it?
BILL HIGGS: Yeah, and that’s—I think that’s a clear path of this belief statement that we have, is that—you know, clearly, we are—those of us that are publicly traded are discounted relative to our peers, the trade in other jurisdictions. And that discount is as a consequence of the risk placed on us producing and operating in Kurdistan. Now, we have—we have—we’re very content and happy with that risk. We have a very strong relationship with the Kurdistan regional government. And so what it is, is it’s about what actions and behaviors can we take to provide that level of certainty to the—to the world out there, to investors more broadly, that Kurdistan is a good place to invest?
And I think, to His Excellency’s point, it is around—you know, unfortunately we have to announce when we get paid. And that is a signal to the markets when it’s irregular that there’s uncertainty. And His Excellency also pointed out, the supreme court ruling in Baghdad is real noise on the international markets’ appetite for looking at Kurdistan. But I think it is about working together, getting these—getting these signals right, so that we become—we, as the public companies, become a way of measuring how Kurdistan is perceived. And I think is—then becomes part of this investibility story for moving into other, you know, businesses and other industries.
EITHNE TREANOR: Majid, but when, you know, you’re operating there and you hear this, and we take—of course, you know, we listened to what you said. A grave injustice in terms of what has happened coming out of Baghdad recently. Yes, the headlines grasp this and say it’s all going horribly wrong in Kurdistan again in Baghdad. But as operators, how do you look at this and what do you take from it? Does it make you nervous?
MAJID JAFAR: So in terms of challenges, you know, there are challenges in every environment. When we entered—and everybody here on this panel were pioneers, which is really important. And we take a long-term perspective. Our contracts are long term. We’ve been now close to 15 years—actually, 15 years this year. And our contracts run till middle of the century. So it’s really a partnership. We’ve been through many things together. Among them was Daesh. I remember a lot of the oil majors, who were, by then, in Kurdistan, all rushed to the airport when Daesh—and they weren’t even really operating. They just had offices in Erbil.
It’s the guys up here, the companies up here, and others—DNO and others who are not here—who remained, who invested, who grew the production, and who are still there today. So we’ve been through many challenges. I mean, there were rocket attacks in Erbil recently. But again, there have been rocket attacks in Abu Dhabi, and even this week in Saudi. Unfortunately, these things, you know, are happening in our region. We take the long-term view and the commitment to both the government and the people, and really doing what’s right by them in terms of the energy provision and the economic value-add.
As far as Baghdad and the rest of Iraq, my family is originally Iraqi and my grandfather actually laid the foundations for the modern petroleum industry in Iraq back in the 1950s when he was development minister, and actually inaugurated the hydroelectric dams in Kurdistan, which are still producing power today. And for 50 years, until we started producing gas in 2008, they were the only sources of indigenous power within the Kurdistan region. So there has been neglect. And the constitution, as far as we’re concerned, is very clear. And we’re aware of the politics in Baghdad and what might drive this or that. So we’re not concerned. And we take the long-term view, and make sure that everything we do is in line with the Iraqi constitution and, as I said, the policies that actually benefit the people of the Kurdistan region and all of Iraq.
EITHNE TREANOR: And, Bill—not Bill. Sorry, forgive me. Jon, again, you’ve had a history there as well. In terms of ease of doing business, you know, are you happy there at the moment? Is anything in your company getting nervous about what’s happening?
JON HARRIS: I think to—as the others have said, you know, we’re in this for the long game. We’ve been here for 15 years already. And we see—sorry—and we’re—and we’re going to be in it for the long game to continue as well. I think, you know, Bill said around—there’s a risk-reward kind of equation that goes on with a public company. And we are—you know, we are traded at a discount, as is Genel. So GKP’s traded at a discount. And we accept that, and we acknowledge that risk, and we work with mitigating those risks as best as possible. We do see, I think, as Bill said, you know, we welcome the opportunity—any and every opportunity—to collaborate to bring better clarity and better transparency around those risks. And solving those quickly and speedily will help facilitate not only our investment, but also others—encouraging others to come and invest in Kurdistan.
EITHNE TREANOR: And clearly, I think when we listen to operators like yourself who are there—and, Ross, please come in on this—you know, ease of doing business, you know, that commitment to—that the prime minister has actually given, you know, very publicly, and they’ve done this time and time again too. What would you say to other investors looking at, or prospectors, looking at the region at the moment?
ROSS PEROT, JR.: I think Kurdistan, as I mentioned, has got huge potential. I think the half a million a day is just a warm-up for the Kurds. I think they could get to a million or 1.5 million. And so more investment is needed. More investment should come in. And if you follow the model, developing relationships with the Kurds and with the energy ministry—and then we’re very fortunate we have great continuity. I mean, our team—it’s the same team that’s been there 15 years. We’ve got the continuity. We’ve got the understanding. But then we deliver. I mean, we do what we say we’re going to do. And if you do that, you’ll have a great relationship.
EITHNE TREANOR: Adel, can you hear us on this?
ADEL CHAOUCH: I can hear you very well, yeah.
EITHNE TREANOR: Yes, exactly, it’s just really, really looking and examining the ease of doing business in the region. Clearly, you know, the headlines sometimes I think maybe scare those of us who don’t know as much as you know, because you are the people who are operating there. But how does it look from your side?
ADEL CHAOUCH: Look, like a couple of our colleagues, we are a publicly traded company ourselves. Actually, in both—in two jurisdictions, in Canada as well as Sweden here. And we do have shareholders. And, of course, we have the obligation to inform them what’s happening here. Clearly, we inform them about the challenge and the opportunities in every place we are, and the same thing in Kurdistan. ShaMaran is part of a much larger group. It has 13 companies in the oil, renewable, gas and mining sector. And we see our presence in Kurdistan to be among one of the best we had within the group. We were able to establish relationships with the government and local communities for a long time. And I think that relationship will continue to build as we continue to mature our business.
Now like it is—of course, the challenges are very specific to Kurdistan and different from what you see in other places in the world, like, for example, you know, in the shale, Permian, and other places maybe in West Africa. And to that, the context is very unique. So the explanation to our shareholders goes along with the territory where we are. We understand the risk. We see the mitigations are coming in place. And we are also for the long run. We believe a practical solution will come in as we’ve seen them unfold over the past decades in Kurdistan. So we committed to that, and we believe in the ability of the Kurdistan region to find these practical solutions to address these challenges.
EITHNE TREANOR: And I believe they certainly will do. Majid, when we look at the potential for gas—you’re the only gas operator, so to speak, here. And again, the prime minister talks about that. I think one theme we’re hearing at this Atlantic Council too is the tremendous opportunity for gas. And we look at the situation in Europe. We look at what’s happening in Russia. Is there enough gas there? And is there the potential that actually gas from Kurdistan could one day be coming and servicing the European market?
MAJID JAFAR: Yes. So this point about the global energy security, which has come to the fore, of course, because of the conflict in Europe, and we’re absolutely hearing that all day today, in every panel session, I would say. And I think the role that the Kurdistan region plays—first of all, on oil. Half a million barrels a day of oil and the potential to increase that is critical for current oil markets. And then on the gas side, as I said, we will be at, you know, a bcf a day within a couple of years, and covering the domestic needs within the Kurdistan region.
And we have proven up through our appraisal works 15 trillion cubic feet of gas reserves and potential resources of 18 trillion cubic feet. So the potential to meet the local needs, including other parts of Iraq but also export to Turkey and onto Europe, is there. And there aren’t many—I can’t think of any other, you know, resources like that, that could supply pipeline gas within a meaningful timeframe. So absolutely the geostrategic importance of the region is now, I think, increasingly becoming recognized.
EITHNE TREANOR: And just stay with that for a moment too in terms of, you know, investment. What are we looking at in, you know, the expansion—the possibilities that are there? But this is all going to take a lot of investment. And at the moment, you know, it may change for the short term in terms of availability and encourage investments for hydrocarbons. But is the investment there? Are you happy that you can access it?
MAJID JAFAR: So I think, you know, we—as I said, so far we’ve investment $2.3 billion. And addition to our equity investment, those of our partners, we’ve had finance support from local banks here in the UAE, contractors as partners, contractor financing, and also, as His Excellency mentioned, late last year we successfully announced a $250 million finance from the US Development Finance Corporation, one of only two hydrocarbon projects in the world that they financed, which is—the other one is in Sierra Leone, also gas to power. Because they recognize not only the socioeconomic benefits, and the strategic benefits, but the climate benefits in gas replacing diesel fuel. And we’re currently pursuing several different financing options, and we’re confident that it’ll be doable to achieve the expansion plans that are underway and needed.
EITHNE TREANOR: Bill, talk to us about investment. I think it’s something from all of you our audience here would like to hear as well, because, you know, when we look at investment houses around the world, and they’re looking at their ESG requirements too, oil is certainly not number one. Has it got a lot more difficult to actually raise investment?
BILL HIGGS: It clearly has, although we’ve got—because of the recent events and because of the rise in commodity prices, we’re seeing a significant shift back towards the—you know, to the oil and gas markets. But, I mean, I think what we need is we need a clear framework, because these longer-term investments require line of sight that they can actually be repaid. And I think that’s one of the biggest challenges when we look. It’s not a—it’s not an issue in Kurdistan. And again, I think it’s fantastic to hear His Excellency talk about the sanctity of contract. The challenge is, is when you deal with the European market and you’re looking for longer-term contracts to get gas projects up and going from northern Iraq, it requires that commitment to hydrocarbons for a longer horizon than I think people think about.
And what we need to—I was thinking about this earlier. We very often talk about the energy transition and about hydrocarbons are a pathway, or the hydrocarbons are a bridge. One of the things that hydrocarbons definitely are not are not a springboard. Because if it was a springboard, you jump off of that. And I think too many people have it in their minds that what we’re going to do is we’re going to jump off of oil and gas and somehow there’s going to be this new future out there. So it is getting this pathway mapped out and being able to make the investment.
And I think, to your point, we’ve invested $3.5 billion in Kurdistan over the last 20 years. And I was—I think what I would say about the risk profile of Kurdistan, the simple answer to it is: Go visit. I took one of my directors into Kurdistan for his first visit, and all the way home on the plane he was going, mispriced risk, mispriced risk, mispriced risk. So as we go and visit, you go to Erbil, and you go out and meet people and travel around the region, you see—you can feel and see the energy that’s there.
EITHNE TREANOR: And that’s exciting to hear. I’ve never been there myself, but colleagues who have, when they’ve come back, I mean, they’ve been presently surprised. People perhaps not involved even in the oil and gas industry, but actually looking at the environment, and looking at it. And, you know, Jon, when you invest there, it’s also about, yes, investing in the company but do you also feel, I suppose, you know, when you get that investment in place it’s also about investing in the economy for the future? There’s growing demand there, without a doubt. And I think that’s demand racing ahead.
JON HARRIS: Certainly. You’re very welcome to come.
EITHNE TREANOR: I’ll have to come and do a trip, a visit.
JON HARRIS: Please come, please come! We’ll help you with that.
On your question around investing for the future, I see it—because we’re all talking about huge potential, I see it—and also His Excellency talked about a strategic imperative to increase hydrocarbon and gas production. I think it’s really—we kind of—we share that vision. We share that vision that really our investment—our future investment, we’ve only invested 1.7 billion [dollars]. So I’m humbled by the rest of these investors on the stage. We haven’t invested as much, but there’s an opportunity for us to kind of certainly catch up—catch some of them up. And I think what that does is it provides a huge wealth of opportunity, an opportunity for, you know, the government to share in our contract will be huge.
So it allows them to take that money and to build out—diversify the economy, transition the economy into renewable energies and green energies as part of that. I also see it as this massive opportunity to really invest in our people. We’ve just seen now the amount of local content in our—in our development expenditure is absolutely ramping up. You know, it used to be—it used to be a very disappointing number. Now we’re actually getting up to very high percentages. You know, like 70 percent of our investment is in local firms. And also the development of the people as well. It’s a huge opportunity to invest in the people, both in developing engineering skills, but all sets of skills across the whole business chain. So I think it’s just a—it’s a massive opportunity for Kurdistan. Thank you.
EITHNE TREANOR: We’re going to have to begin to wrap this up. And I’m terribly sorry about that. One area we haven’t talked a lot about and, you know, you did mention it Majid too, is the environment there. Perhaps, Adel, if we could finish that—on that note from you, as you look to the future and the concerns and the work that you’re doing in terms of making sure that your production is environmentally sound and that it’s do no harm, and make sure that you’re looking ahead to a transition of energy but to a sustainable future as well.
ADEL CHAOUCH: Yes. Thank you for that. I’ll cover a couple items here in terms of addressing the environment. We and our partner, TAQA, we were the first actually partners to set up reinjection wells to make sure that there is no produced water that goes into the environment. We’re very pleased about that. We’ll continue with that initiative.
Also, we have made a very strong commitment, with the support of our shareholders, our investors, towards carbon intensity reduction. I’ll give you some examples, you know, on our assets. Virtually all our flare facilities are running now with solar panels. We are in the process of deploying our gas solution to basically remove the flared gas, right now use it to displace diesel that is currently used for power generation on our side. So we’ll replace it, you know, with a lower carbon intensity source, gas. And as we speak, we are in the process of deploying a solution—a nature-based solution to mitigate the carbon production here and shorten, basically, cycle to bring our barrels to a carbon zero in a very short order.
EITHNE TREANOR: Jon, a few closing words. You talk about being in this for the long-term. Clearly, you’re looking ahead to the opportunities that are there. I know that you’re very concerned about gas flaring. This is something you’re working on as well. So that focus on sustainable energy in terms of being a clean product, but also being a long-lasting business.
JON HARRIS: Yeah, absolutely. We are very concerned about how scope one and scope two emissions. And we are—you know, currently, we are—we’re out tendering for a contractor to come in and take our flared gas and reinject it into the reservoir. So ultimately, we are—we won’t be flaring anymore. And then I think we’re also looking hard on a whole raft of other opportunities to further reduce our CO2 emissions and drive those down to an absolute minimum. Thank you.
EITHNE TREANOR: Ross, again, I’m sure this is a priority for every producer in the region as well, making sure that the sustainability in terms of product and business is built in.
ROSS PEROT, JR.: Well, sustainability is very important. But I think one part of sustainability is how do you localize your workforce? And with the highest—the thing I enjoy most when I go to Kurdistan and meet our team is meeting all the young Kurds that have joined out team. And I look at these young men and women learning great lifetime skills. And I think of the prosperity it’ll bring to their families and to their children. That’s the sustainable focus we have, is really providing jobs to our Kurdish team. But then how do you take care of your neighborhood? How do you take care of all the little towns you work in? How do you take care of the mayors? We build schools, we build gyms. During COVID we brought out masks, we did vaccines. That’s the thing we like to do. We really do try to make a region better and improve it every day.
EITHNE TREANOR: So in terms of being a responsible producer, but also being a responsible corporate player.
Bill, just a closing word from you.
BILL HIGGS: Yeah, I think it’s absolutely right. It’s the whole package of ESG. When we think about ESG, you know, we’ve made $60 million of contributions to local communities and projects. And like Jon, we actually initiated with our partner, DNO, the first gas reinjection project at the Peshkabir field to reduce the flaring there. But it is—it’s total—as Ross says, it’s this total package of how can you make a difference? Which comes back to those three principles of resilience in your returns so that you can make the subsequent investments, make sure you get your emissions as low as possible, and make sure you’re having an impact on the communities where you work.
EITHNE TREANOR: Majid, I wanted to give you the closing word. I see you as our flag-waver here, our flag-bearer for the region.
MAJID JAFAR: Thank you. So I think it is a real success story. I would encourage everybody to visit. My father, our chairman, who’s here with us, says it reminds him of the UAE and Dubai in the early days, when you see the development there and how quickly it’s changing. And I think the key there is it’s a pro-private sector approach. They put in a world-class oil law, and they put in production sharing and other types of investment contracts. The government plays the role of regulator and revenue maximizer. And that’s actually quite rare in our region. In the Middle East, we tend to have kind of national oil companies, socialist mindset. And often many investors complain of bureaucracy and difficulty of decision making. So it’s been a very, you know, positive pro-investment approach. And I would commend all to visit and learn in all sectors.
EITHNE TREANOR: And that’s wonderful to hear, I think, from all of you. As I say, you know, you’re businesspeople. You started this operation off with, you know, a focus there. And again, it has to be that win-win for everybody. So despite any uncertainties, to which you say, you know, can exist and will exist in any investment, we wish you all the best.
So our time is up, I’m afraid. I want to thank you so much. Adel, thank you for joining us. Jon, Bill, Majid, and Ross, thank you so much. Delighted to have you. And of course, to our dear prime minister who joined us and took the time. I think all of your dear partners, they’re delighted to have you here. And we’re particularly thrilled that you took time to spend at the Atlantic Council. Thank you, Your Excellency.
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Image: Masrour Barzani, prime minister of Kurdistan region speaks during an interview with Reuters in Erbil, Iraq July 9, 2019. Picture taken July 9, 2019 via REUTERS/Azad Lashkari.