Kurdish Policy Analysis

By Dr. Pshtiwan Faraj | Kurdish Policy Analysis  

 A $2.239 billion arbitration settlement, a contract running until 2049, expanded rights for Pearl Petroleum and a new battle over gas sales to Baghdad are raising uncomfortable questions about who ultimately controls Kurdistan’s most strategic natural resource.

The latest dispute over Khor Mor gas is exposing a much deeper problem in the Kurdistan Region’s energy sector: the public still does not appear to have a clear picture of who controls the region’s gas, who is authorized to sell it, and how much of its future value has already been committed to private companies.

At the center of the controversy is Pearl Petroleum, the consortium led by Dana Gas and Crescent Petroleum, and a settlement agreement reached with the Kurdistan Regional Government (KRG) on August 30, 2017.

Kurdistan Parliament member Kawa Sheikh Ali has now sharply criticized that agreement, asking why a government would effectively commit its natural wealth for decades without sufficiently involving parliament or public opinion.

His criticism is particularly explosive because the 2017 settlement did far more than resolve an old legal dispute.

It reshaped the economic relationship between the KRG and Pearl Petroleum.

It involved $1 billion in immediate payments and investment, another $1.239 billion in arbitration awards being converted into recoverable costs, an extension of contractual rights until 2049, expanded investment opportunities in blocks 19 and 20, and a mechanism under which Pearl could market and sell half of additional gas to customers inside Iraq or potentially for export.

The question now is unavoidable:

Did the KRG negotiate away too much control over Kurdistan’s gas in exchange for ending a costly arbitration dispute?

And an even more immediate question has emerged:

If the KRG itself says Dana Gas cannot move or sell Khor Mor gas without Erbil’s approval, why does the contractual framework appear to give Pearl significant marketing rights over additional gas?

That contradiction deserves a public explanation.

The $2.239 Billion Question

The controversy begins with an international arbitration dispute between the KRG and the consortium.

The dispute originated from the 2007 agreement concerning the Khor Mor and Chemchemal fields. The disagreement eventually went to arbitration in London.

By 2017, the dispute had become extraordinarily expensive and politically sensitive.

The settlement announced on August 30, 2017 stated that the arbitration had resulted in $2.239 billion in awards to date.

Rather than simply paying the entire amount as an immediate cash liability, the settlement created a different financial structure.

The KRG agreed to immediately pay Pearl Petroleum $600 million, plus another $400 million dedicated to further development.

The remaining $1.239 billion was reclassified as outstanding cost recoverable by Pearl from future revenues generated by the relevant contract areas.

That distinction matters enormously.

The $1.239 billion did not simply disappear.

It became a claim against future project revenues.

In other words, future gas revenues would effectively carry the burden of recovering that amount.

Kawa Sheikh Ali characterizes this as loading the financial consequences of the settlement onto future revenues belonging to the people of Kurdistan.

Whether one agrees with that political characterization or not, the underlying contractual mechanism is real and publicly documented.

Dana Gas itself disclosed that the $1.239 billion was reclassified as recoverable from future revenues.

That is precisely why the agreement deserves much greater public scrutiny.

The $1 Billion Was Only the Beginning

The most politically sensitive aspect of the 2017 agreement may not have been the immediate $1 billion payment.

It was what came afterward.

The settlement did not merely resolve the old dispute.

It changed the future economics of the fields.

Once costs and the consortium's return on investment were recovered, the agreement provided for 78% of revenues from the relevant areas to go to the KRG and 22% to Pearl Petroleum.

At first glance, 78% may sound overwhelmingly favorable to the government.

But the critical question is:

78% of what, and after which costs have been recovered?

That is where transparency becomes essential.

A government cannot simply announce that it receives 78% and expect the public to conclude that the deal is automatically favorable.

Citizens need to know:

• What costs qualify for recovery?

• How are those costs audited?

• Who verifies the company's accounts?

• What rate of return is recognized?

• Which expenditures can be deducted?

• How much of the $1.239 billion remains unrecovered?

• How much revenue has already been generated?

• How much has been paid to the KRG?

• How much has been retained by the consortium?

• What is the projected cumulative value of the contract through 2049?

Without those numbers, the 78/22 formula tells the public only half the story.

Why 2049 Matters

Perhaps the most consequential element of the settlement is its duration.

The agreement extended the contract term until 2049.

That means the settlement was not simply a mechanism for closing an old arbitration case.

It was also a long-term restructuring of control over strategic gas resources.

Dana Gas continues to emphasize this contractual longevity.

In a 2026 interview, Crescent Petroleum CEO and Dana Gas chairman Majid Jafar said the contracts continue until 2049 and argued that the consortium's long-term presence is necessary to justify further investment.

From the company's perspective, this is straightforward.

Energy companies need long-term contractual certainty before committing billions of dollars.

But from the public-interest perspective, the question is different:

Was the extension to 2049 proportionate to the settlement, and was the public adequately informed about what Kurdistan was giving in return?

That question becomes even more important because the agreement also expanded the consortium's opportunities into adjacent blocks 19 and 20.

The 2017 settlement states that the KRG awarded the consortium investment opportunities in those blocks and added them to the relevant agreement areas.

That is a significant concession involving future resource potential.

And Then There Is the Gas-Sales Clause

This is where the current dispute with Baghdad becomes particularly important.

The 2017 settlement did not limit Pearl's role simply to producing gas for Kurdistan's power stations.

Under the agreement, the KRG would purchase 50% of the additional gas.

The other 50%—described as approximately 250 million cubic feet per day—could be marketed and sold by Pearl to customers within Iraq or by export, while also allowing it to be sold to the KRG for additional power generation.

That provision is central to understanding today's controversy.

It means that the contractual architecture was never exclusively about supplying Kurdistan's electricity sector.

It contemplated a commercial market for additional gas, including sales elsewhere in Iraq and potentially exports.

And this creates a difficult legal and political question.

If Pearl has contractual marketing rights over part of the additional gas, how does that interact with the KRG's authority over natural resources?

The KRG has previously insisted that gas produced from Khor Mor cannot be transported or sold to another party without the KRG's approval.

In 2023, the KRG Natural Resources Ministry publicly warned Dana Gas against any agreement with the Iraqi government to transport Khor Mor gas without Erbil's authorization.

The same position was reiterated in 2024, after Baghdad moved toward purchasing gas from Khor Mor for the Kirkuk power station. The KRG ministry said that no gas produced from the field could be sold without the regional government's consent.

This creates an obvious governance problem.

The public needs to see the exact contractual provisions governing this relationship.

If Erbil retains final approval over all gas sales, then it should explain precisely why.

If Pearl possesses independent marketing rights over a portion of additional production, then the KRG should explain precisely how those rights operate.

And if both provisions exist simultaneously, the public deserves to know which authority prevails.

Is Dana Gas Acting Like an Owner?

This is the most provocative accusation raised by Kawa Sheikh Ali.

He argues that the structure of the agreement has effectively transformed the private consortium into something resembling the real decision-maker over Kurdistan's gas.

That language is politically charged.

Legally, Dana Gas is not the owner of Kurdistan's natural resources.

The consortium operates under contractual rights granted by the KRG.

But the criticism points toward a legitimate governance concern:

A company does not need to legally own a resource to exercise enormous economic power over it.

If a private consortium possesses long-term development rights, cost-recovery mechanisms, production rights, marketing rights, investment opportunities in additional blocks and contractual protection extending to 2049, then its practical influence over the resource can become extraordinarily significant.

That is precisely why the distinction between ownership and control matters.

The KRG may retain sovereign ownership while simultaneously giving a private consortium substantial contractual control over production, investment and commercialization.

That is not inherently improper.

International energy companies routinely operate under long-term contracts.

The problem begins when the public cannot easily determine the terms under which that control was granted.

The KRG Has a Transparency Problem

The strongest criticism of the KRG is therefore not necessarily that it signed an agreement with Dana Gas.

Kurdistan needs investment.

It needs gas infrastructure.

It needs electricity.

It needs companies willing to invest billions of dollars in a politically and militarily complicated environment.

Dana Gas and Pearl Petroleum can legitimately argue that they took enormous risks and invested heavily in the region.

Dana Gas says the consortium and its partners have invested close to $4 billion in the Kurdistan Region. In 2026, Majid Jafar argued that the project had generated major economic benefits, including electricity savings and broader economic activity.

Those claims should not simply be dismissed.

But neither should they end the debate.

Investment does not eliminate the government's obligation to disclose the terms under which the investment operates.

If anything, the larger the investment and the longer the contract, the greater the need for transparency.

A contract running until 2049 is not a routine administrative agreement.

It potentially affects multiple generations.

Parliament Should Demand the Full Contract

This is where Kawa Sheikh Ali's criticism strikes at the heart of the matter.

If the agreement fundamentally changed the financial and contractual position of Kurdistan's gas sector, parliament should have access to the complete agreement, its annexes, amendments, cost-recovery provisions and sales arrangements.

The public should be able to determine exactly what was signed.

The government should disclose, at minimum:

1. The complete 2017 settlement agreement.

2. The current consolidated version of the Khor Mor and Chemchemal contractual arrangements.

3. The outstanding balance of the $1.239 billion recoverable amount.

4. All payments made to Pearl Petroleum since 2017.

5. All revenues received by the KRG from the fields.

6. The methodology used to calculate recoverable costs.

7. The current ownership and contractual interests of all Pearl Petroleum partners.

8. The exact legal mechanism governing sales of additional gas to customers inside Iraq.

9. The exact legal mechanism governing any future gas exports.

10. The contractual relationship between Pearl Petroleum, the KRG and the Iraqi federal government.

Without this information, public debate will remain trapped between two competing narratives.

The company will say:

We invested billions and brought energy to Kurdistan.

Critics will say:

The government surrendered too much of Kurdistan's future wealth.

The only way to determine which side is closer to reality is to publish the numbers.

The Baghdad Question Is Becoming More Important

The controversy has become more urgent because Iraq itself increasingly needs gas.

Kurdistan has moved from being a recipient of energy infrastructure to potentially becoming a supplier.

Dana Gas says Khor Mor production exceeded 700 million standard cubic feet per day after the KM250 expansion and that further growth is expected during 2026.

That changes the strategic equation.

For years, Kurdistan's gas was primarily associated with powering its own electricity network.

Now Baghdad wants access to that resource.

That could be economically beneficial for both Erbil and Baghdad.

Iraq spends billions importing energy.

Kurdistan has domestic gas reserves and production capacity.

Selling gas to Iraqi power plants could therefore make economic sense.

But the commercial arrangement must be transparent.

The people of Kurdistan should know:

Who is selling the gas?

Who sets the price?

Who receives the payment?

Who owns the gas before it reaches Baghdad?

How much goes to the KRG?

How much goes to Pearl Petroleum?

Who pays transportation costs?

Are there taxes, royalties or cost-recovery deductions?

Does Baghdad pay Erbil directly, or does money flow through the consortium?

These are not minor technical questions.

They determine whether Kurdistan is monetizing its natural resources in the public interest—or simply allowing another layer of private commercialization to develop around them.

A Resource-Rich Region That Still Faces Energy Shortages

There is also a painful irony.

Kurdistan possesses enormous hydrocarbon resources, yet its population continues to experience electricity shortages and fuel insecurity.

The strategic importance of Khor Mor became painfully clear after attacks on the field disrupted gas production and caused major electricity interruptions. Reuters has previously reported that attacks on Khor Mor sharply reduced electricity generation across the region.

That makes the gas fields not simply commercial assets.

They are national-security infrastructure.

The government therefore needs a much higher level of transparency around who controls production and sales.

A private company can be an operator.

It can be an investor.

It can be a contractor.

But the state must remain capable of answering a basic question:

Where is the gas going, and under whose authority?

If the government itself cannot clearly answer that question, the problem is bigger than Dana Gas.

It is a problem of governance.

The Real Test: Who Controls Kurdistan's Future Gas?

The Dana Gas controversy should not be reduced to a simplistic argument that foreign companies are exploiting Kurdistan.

That would ignore the enormous investment and infrastructure the consortium has brought to the region.

Nor should it be reduced to the opposite argument that because the company invested billions, every contractual concession must therefore be justified.

Neither position is sufficient.

The real question is whether the KRG negotiated a commercially defensible agreement and whether it has been transparent enough about that agreement for parliament and the public to judge it.

The publicly available 2017 documents confirm several of the most important facts raised by Kawa Sheikh Ali:

• The settlement concerned $2.239 billion in arbitration awards.

• The KRG agreed to $600 million in immediate payment.

• Another $400 million was allocated for investment.

• $1.239 billion was converted into recoverable costs from future revenues.

• Pearl's post-cost-recovery revenue share was set at 22%, with 78% allocated to the KRG.

• Investment opportunities were expanded to blocks 19 and 20.

• The contractual term was extended to 2049.

• Pearl was given a mechanism to market 50% of additional gas, including sales to customers within Iraq or by export.

These are not rumors.

They are elements of the publicly disclosed settlement.

What remains insufficiently clear to the public is how these provisions operate today, how much money has actually been recovered, what the current consolidated contract says, and precisely how the rights to sell gas to Baghdad interact with the KRG's insistence that gas cannot be transferred without Erbil's approval.

That is where the KRG needs to provide answers.

Kurdistan Cannot Afford Another Energy Black Box

The region has already experienced years of controversy over oil contracts, export revenues, payment mechanisms and relations with Baghdad.

Repeating the same opacity with natural gas would be a strategic mistake.

Gas could become one of Kurdistan's greatest economic assets.

It could supply electricity.

It could support industry.

It could reduce dependence on imported Iranian energy.

It could generate revenues.

It could strengthen Kurdistan's bargaining position with Baghdad.

And eventually, it could support exports.

But that future will only be sustainable if the public trusts the contracts governing it.

The KRG should therefore publish the complete contractual framework governing Khor Mor and Chemchemal, explain the outstanding financial obligations created by the 2017 settlement, disclose revenues and cost recovery, and clarify exactly who has authority to market and sell gas to Baghdad.

Because the question is no longer simply whether Dana Gas should sell gas to Iraq.

The deeper question is much more uncomfortable:

After nearly two decades of contracts, arbitration and renegotiations, does the Kurdistan Regional Government still exercise meaningful control over the commercialization of its gas—or has it created a contractual system in which private companies have acquired so much long-term authority that the government itself must negotiate for access to its own resource?

Until the contracts and the money are placed fully in the public domain, that question will remain unanswered.

And for a resource that is supposed to belong to the people of Kurdistan, silence is not transparency.

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