Iraqi Oil? Look to Kurdistan

"Saddam was reasonably effective -- obviously a dictator and unjust. [Current prime minister] Nouri al-Maliki has not even had the efficiency of the Baath party."
"They have been arbitrary, corrupt and ineffective. The net result is that it was an event waiting to happen."
"It is in a desert area, so nobody really controls it. But the access areas are in the control of Sunni militia."
"Under Saddam it was quite safe -- you only had one gangster to deal with. But [after the war] we had lots of interesting experiences with Sunni militia, former Iraqi army and Islamists."
"We are on a knife edge. There is a major risk now of a price spike in oil."
David Horgan, oil executive, Dublin-based Petrel Resources

Strategic target: Smoke rises from the Baiji oil refinery in northern Iraq which is at the centre of fierce fighting between government troops and ISIS militants. Rebel forces have raised the black jihadist banners and manned checkpoints around the facility despite government forces insisting they were in 'complete control' of plant

Much depends on oil; its extraction, refining, and circulation. The world runs on oil exports. It enriches the oil cartel members and the world's dependence on the countries of the Middle East, Venezuela, Nigeria and other world hot-spots leaves both oil exporting companies and the vast consuming public on tenterhooks of apprehension. Whatever happens in those far-off, destabilized tyrannies affects the world.

The simmering insurgency in Syria that lapped over into Iraq, that threatens to destabilize Jordan, Egypt, Lebanon, Turkey, Israel, Saudi Arabia for starters has far reaching consequences. Which of those countries will survive? The border between Syria and Iraq has been summarily erased; a new state has inserted itself, one whose interests are directly inimical to not only the other nations of the Middle East but to the world at large.

The caliphate will have no interest whatever in accommodating the energy needs of outside interests; it is entirely focused not on fossil fuel extraction, using those vast natural resources to fund itself, but on the domination of the Middle East, and from there, the world; there are no perceivable barriers to that achievement as far as the Islamic State is concerned, calling on all devout Muslim men to martyr themselves to the cause of Islam.

Petrel Resources has invested tens of millions in seismic work, drilling, and the boosting of oil production in Iraq's western desert, in the east of the country and elsewhere. It has worked alongside  Oryx Petroleum and the U.S. government to ensure the oil flowed, lavishly, boosting production from 50,000 barrels a day to over 200,000 in the western desert. Now it, like Talisman Energy and Sonoro Energy and WesternZagros Resources are looking on nervously wondering about their investment in Iraq.

As poorly managed as the country has been under Nouri al-Maliki's Shiite-led government, the oil did flow effectively; oil infrastructure in the south, providing the bulk of the country's 3.3-million-bpd production still remains untouched; but in the face of the federal government in Baghdad's inability to defend parts of the country, its future is uncertain and so is its capability to produce oil and export it in amounts that foreign oil corporations are anxious to maintain.

 Armed and dangerous: Al-Qaeda inspired militants stand with a captured Iraqi Army Humvee at a checkpoint belonging to Iraqi Army outside the Baiji refinery

"ISIS's success makes any restart of the Kirkuk-Ceyhan pipeline look doubtful, but it may also clear the path for the Kurdish Regional Government to assume more control over its oil revenues and possibly towards it becoming its own sovereign entity", stated Citibank analyst Seth Kleinman. All eyes turn on the Kurds and Kurdistan for stability in the country; with its taking of Kirkuk and the nearby oilfields, it has already shipped oil via Turkey to Israel.

Exxon Mobil and BP are reported to have evacuated some of their staff. Even while the Iraqi production appears to have withstood the onslaught by the Islamist militias. Prices had reached a nine-month high of $115 on June 19, but they moderated more recently below $113 U.S. per barrel. Still, Asian refiners are no longer intrigued by the prospect of buying Iraqi crude in spot markets, concerned over the Islamist insurgency.

"They look at the map and say, 'The Sunni guys aren't close to production', but the 2010-11 civil war in Libya showed that production can evaporate overnight even if energy infrastructure is left untouched", said Mr. Horgan.