While the feds allowed their export agency to sell the KRG oil abroad, it didn't pass on any of the proceeds to Erbil or the companies.
"How can we approve payment when we have no knowledge of the terms of their contracts?" asked Oil Ministry spokesman Mr. Jihad.
"We will only resume export with guaranteed payments," says a resigned Asti Hawrami, the KRG's Minister of Natural Resources.
Since Oct. 14, all the oil produced in Kurdistan has been distributed to domestic users.
But Heritage Oil isn't scared off. "We remain committed to the Genel Energy merger," Heritage CEO Tony Buckingham said in a statement a week after the exports ceased. Mr. Buckingham, reportedly a former mercenary and deep sea diver, appears to be comfortable with the risk.
The legal clouds, however, explain the absence of the major oil companies in Kurdistan - all except China's Sinopec.
"The Chinese are more willing to take risks, like operating in a very murky legal framework," Mr. Priddy says.
WesternZagros, meanwhile, is still exploring but would be reluctant to develop discoveries, should it strike pay dirt.
"The big capital expenditure is in development costs," Mr. Hatfield says. "We won't do that until there's agreement [between the KRG and Baghdad.]rdquo;
Ground Zero A settlement for Kirkuk is the most pressing political issue Iraq faces, making it one of the two most physically risky provinces in which to operate.
The Kirkuk region is one of Iraq's major oil-producing centres, and Shell is quietly negotiating with Baghdad on a deal to boost production from the nearby fields. But security remains a major stumbling block.
"Kirkuk is our Jerusalem," says Jalal Talabani, leader of the Patriotic Union of Kurdistan and President of Iraq. It was the PUK that took custody of Kirkuk in 2003, and largely holds sway there today.
But the matter is far from settled, given Baghdad strengthening its power, the Iraqi troops now amassed in the province and Prime Minister al-Maliki's strident centralism.
Meanwhile, Kurdish administrators have helped thousands of Kurds move back to Kirkuk, and provided financial incentives, and not-so-subtle pressure, to encourage Arab residents to leave.
The realignment of Kirkuk's population, first by Saddam Hussein, and now by the Kurds, has become "the main flash point in Iraq," says IHS Global Insight's Mr. Ciszuk.
And its outcome will determine who gets Kirkuk - its territory and its wealth.
"If there is a part of Iraq where the future does not look bright currently, it is that part of Iraq," Mr. Ciszuk says.
"And these [major oil]fields would be smack-bang in the middle of high tensions between the Kurds, being the most organized single faction, and the central government."Report Typo/Error
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