The Race to Tap The Next Gusher

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Such measured comments have not stopped the excitement whipping across Kurdistan. "For us, new wells are very, very important," says Falah Mustafa Bakir, senior aide to Kurdish Prime Minister Nechirvan Barzani, over coffee in Kurdistan's capital, Arbil. "It is the future, our means of prosperity." Sarbez Hawrami, ceo of Kurdistan's government-run Oil & Gas Petrochemical Establishment, says "about seven British companies" have approached him to discuss deals. Terra Seis now has 12 seismic machines in Kurdistan working for five oil companies, with a list of others waiting for its services. In the 40-year-old Taq Taq field east of Arbil, two Turkish firms are producing oil for local consumption, and one is drilling three new wells. Last September Canada's Heritage Oil signed an exploration deal. "There were always plans to produce oil in Kurdistan, but there were always objections" from Baghdad, says George Yacu, a Kurd who served in Saddam's Ministry of Oil for 30 years until 1999 and is now oil-and-gas adviser to Kurdistan's regional government.

Kurdish officials estimate their unexplored oil reserves at about 45 billion bbl. If that's accurate, Kurdistan's power could soar within Iraq, which depends almost completely on oil for its exports. Some researchers believe the Kurds' oil estimates are unrealistic, but geologist Plintz says his research suggests that unexplored reserves "could be among the biggest in the world." In addition, more than 10 billion bbl. of proven reserves lie underneath the city of Kirkuk, which is situated outside Kurdistan but whose political status is still disputed by Kurds. Though Kirkuk's oil production has plummeted because of repeated insurgent attacks, Kirkuk, like Kurdish fields, would have huge advantages over other Iraqi sites: its output could be piped a short distance to Turkish refineries without passing through any war zones.

Whether the gushers come in or not, Kurdistan is already booming. On the border with Turkey, about a half-hour drive from the DNO rig, it's clear Kurdistan has become Europe's gateway to Iraq. Trucks from Turkey, Austria, Bulgaria, Germany and the Netherlands are backed up for many kilometers. Sea cargo from Dubai is diverted through Jordan, Syria and Turkey before reaching Kurdistan, where it is transferred to Iraqi trucks before proceeding to Baghdad. That route is the only choice: driving north through Iraq from the Persian Gulf is too dangerous.

As one flies into Arbil, the sole sign of war is the airport's heavy security. Kurdish soldiers — or peshmerga, as they are known — sit in tall watchtowers along the perimeter, and civilian vehicles may not enter the airport gates, where baggage searchers wear ski masks to hide their faces. Flights from the new Kurdistan Airlines and other carriers arrive directly from Istanbul, Frankfurt, Dubai and Beirut. Austrian Airlines officials have agreed the company will be the first European airline to fly to Arbil, with three Vienna flights a week scheduled to start sometime this year.

That's just the start. A sprawling $200 million airport is being built on the existing grounds and is scheduled to open next year. Its 4.8-km runway will be wide enough to land the new Airbus 380 — or, for that matter, the space shuttle, boasts Zaid Zwain, Kurdistan's director of civil aviation. "Imagine, people used to fear the sound of jets because of the bombing," he says, standing on the vast, still unpaved runway.

Indeed, the sensation of not being in Iraq is a key factor in Kurdistan's boom. Almost no Iraqi flag flies, and fewer than 1,000 U.S. soldiers are deployed in the territory. In the lobby of Arbil's only five-star hotel, filled with American and European businessmen discussing prospects, the buzz in the crowd has one persistent theme: in the world's most dangerous country, foreign businesses can work safely by basing their Iraq operations in Kurdistan rather than 320 km south in Baghdad. "For anybody wanting to do anything in Iraq today, the entry point is Kurdistan," says Magne Normann, DNO's senior vice president and Iraq project director. "It's a stepping-stone for moving into the rest of Iraq when the time is right." Last November a television campaign funded by the Kurdistan Development Corp. was launched on U.S. networks showing serene rural scenes, using the slogan the other iraq. Still, that message has not translated for some. "People in the States think I'm living in the desert, one step ahead of someone who wants to put me in an orange jumpsuit," says Harry Schute, a consultant to Kurdistan's Interior Ministry who was deployed to Iraq in 2003 as a U.S. Army reservist.

Yet keeping Kurdistan calm requires a heavy military force. Time traveled four hours north from Arbil to DNO's rig in an armored vehicle, on a road marked by several peshmerga checkpoints. DNO asked Time not to publish its Kurdish employees' real names for fear they would be attacked for working for a foreign oil company. (Khadir is not the oil worker's real name.) Kurdistan's fragile peace could end quickly if Baghdad's government tries to curb the Kurds' growing economic clout and political autonomy. Most Kurds don't seem to want any part of a greater Iraq — especially while ethnic violence continues in Baghdad. Large oil finds in the territory "would bolster the sense on the street that the Kurds can survive on their own," says the Western consultant who did not want to be named.

Tawke's residents are focused on more basic problems these days. Over the mutton, Normann asks Omar, the chief, and the rig's star worker, Khadir, how the company can help the villagers. Omar says they need a water well and 50 desks for the tiny village school. Away from the chief, Normann says he knows that such goodwill can help secure the rig's safety from possible attack. Insurgents last year launched more than 200 attacks on Iraq's oil facilities, and have made more than 30 already this year. But Khadir, who earns $500 a month as a oil-rig roughneck — in a village of poor sheep farmers — says an attack against DNO would surely fail. "Everyone in the village would protect the company, even the kids, because this oil is our future," he says. And while DNO waits for the oil to flow, it seems likely that Tawke's children may soon sit in class at desks.