SEOUL (Reuters) – South Korea will provide Iraq with $3.55 billion worth of infrastructure in return for oil field stakes, the Energy Ministry said on Tuesday.
South Korea would be given rights to the fields in southern Basra, which covers the majority of Iraq’s crude output. In exchange, Seoul would build infrastructure such as power plants and generators, the ministry said in a statement.
The agreement came during a meeting between South Korean President Lee Myung-bak and his Iraqi counterpart, Jalal Talabani, in Seoul. A final agreement would be sealed by the first half of the year, it said.
The deal comes at a time when the Iraqi central government and the semi-autonomous Kurdish region are dispute foreign oil deals in the region.
“We regard the new agreement as evidence that tensions between South Korea and Iraq due to Korea National Oil Corp’s involvement in the Kurdish oil development business have eased,” the ministry said.
State-run KNOC recently entered a $2.1 billion investment in Kurdish oil fields alone after consortium members dropped out due to political instability.
SK Energy, South Korea’s top refiner, vowed to stop additional investment in the semi-autonomous region without the central government’s approval.
The right to sign independent oil deals with foreign oil firms has been a sore point between the Kurdish regional government and the central government, as the two sides struggle, sometimes publicly, for control of oil resources and territory. Baghdad has said such contracts are illegal without central government consent.