This month's move by the Kurdistan region of northern Iraq to resume oil exports through a pipeline network controlled by the country's federal authorities has done little to placate Baghdad's anger with western oil companies entering the region.
Deals struck over recent weeks between leading oil companies and Kurdistan's regional government to acquire oil interests in the semi-autonomous region have faced heated opposition from the Iraqi government.
However, some argue that the latest transactions by France's Total, Chevron of the U.S. and Russia's Gazprom have helped mitigate fears among investors over political and operational risk in the region.
Stuart Joyner, an analyst at Investec, suggests that the sums garnered by those companies that have recently sold assets to the oil majors in Kurdistan are modest.
"Not much has been disclosed with regards to terms," he says. "These interests might be selling for modest amounts of money – low single digit dollars per barrel. Compared to East Africa and other hot spots, it's relatively muted."
But the deals are still likely to have earned their sellers multiples of several times their investment, and suggest that yet more oil majors might brazen out the anger of Baghdad by taking positions in the region.
The share prices of companies active in the region have reacted positively in recent weeks, albeit in a limited fashion.
Toronto-listed WesternZagros Resources Ltd., which has signalled its intent to seek a London listing, saw its shares spike from $1.12 to $1.35 in the wake of a deal in which Gazprom assumed a 40-per-cent stake in one of the blocks it controls in Kurdistan.
That deal saw WesternZagros receive $83-million from Gazprom and allowed it to raise $57-million at $1.40 a share earlier this month.
Shares in London-listed Genel Energy, a leading oil and gas operator in Kurdistan, have also ticked up this summer.
Genel in August agreed to buy a further 21-per-cent stake in the Bina Bawi exploration block for $240-million (U.S.).
It is also spending $450-million to buy out the interests of fellow Kurdistan explorer Heritage Oil in the Miran gas field as part of its ambition to be a consolidator in the region – a deal struck at a keen price according to analysts at Deutsche Bank.
Gulf Keystone, another explorer in Kurdistan and Aim's biggest company by market value, also saw its shares pep up at the end of last week, though still well below a high hit in February.
Brian O'Cathain, chief executive of Aim-listed Petroceltic International, which is also present in the region, suggests that though assets are still being traded cheaply, the price of acquiring a foothold in Kurdistan is rising.
Signature bonuses payable to the Kurdistan regional government by companies striking exploration and development deals are also increasing.
He points out that Genel's agreement in May to pay just $175-million for a slightly larger, 23-per-cent stake in Bina Bawi as a sign of appreciating prices for Kurdish oil interests, in spite of Baghdad's stance of freezing companies who do business with the KRG out from the rest of the country.
Petroceltic itself last year took up a 16-per-cent stake in fields operated by Hess. "There's a perceived market risk because people are still unable to confirm when it might be possible to export," he says.
The real game changer for western-listed oil companies producing and exploring for more oil in Kurdistan will be completion of an independent pipeline capable of supplying Turkey direct with 1m barrels of oil per day that is scheduled to be operational by late 2013 or early 2014.
"I don't know anywhere in the world where you have one million barrels a day behind the pipe and it doesn't find its way to market," said Genel Energy's chief executive, Tony Hayward, as he reported results last Thursday.
Backers of the investment case for the region argue completion of direct pipelines will help profitably monetize currently stranded oil and gas assets that have attracted other London-listed companies, including Heritage Oil and Afren, to the Kurdistan area.
Assuming routes to market can be tackled, there is one other key reason why oil companies are overcoming their previous reluctance to deal direct with the KRG at the expense of Baghdad.
"The production sharing contract conditions available in Kurdistan are more generous to the companies than the contracts available from the federal government," argues Mr. Joyner.
Richard Griffith, analyst at Oriel Securities, concurs. "Companies are going up to Kurdistan because they believe in the future of Kurdistan in controlling exports. At one million barrels of oil of a day, Kurdistan will have the ability to monetize its reserves." He accepts, though, that for some investors the case for investing in Kurdistan remains unattractive. "You either like it or you don't like it."