This is a huge blunder by the Korean oil industry that signed a contract with the Kurdish regional government last year to drill oil without the consent of the Iraqi government:

The disqualification of SK Energy, Korea’s largest refiner, and the state-run Korea National Oil Corp. (KNOC) from a lucrative oil deal in Iraq is inviting criticism on their lack of a global sense in business.

The two companies were removed in the second screening of eligible bidders for the project, in which nine companies out of 38 interested parties were accepted.

Prior to the announcement, Iraqi Oil Minister Hussein al-Shahristani notifie Korean Ambassador Ha Tae-yun of the exclusion, saying the earlier signing of a $2.1-billion deal with the Kurdish Autonomous Region was the reason.

“The signing of this contract was against Iraqi law and its Constitution,” Shahristani was quoted as saying to Ha in a meeting in Baghdad. “For that reason, these two companies have been blocked from taking part in tenders.”

In June last year, SK Energy and the KNOC inked a deal with the Kurdistan government for access to nearly two billion barrels of crude in eight fields in northern Iraq that are believed to hold some 7.2 billion barrels of oil reserves. They agreed to invest $2.1 billion in the development of the region’s infrastructure.

Critics say the Korean firms had the wrong idea about the situation in Iraq by underestimating the political discord between Baghdad and the Kurds.

Rep. Noh Young-min, currently a spokesman of the opposition Democratic Party, had repeatedly predicted the Iraqi oil deal might end in failure, and it did.

At last year’s annual parliamentary inspection of the administration, Noh warned Baghdad would annul all the deals Korea had made with the Kurds, saying the KNOC incited “false rosy hopes” by leading a consortium into the northern Iraqi project.

Without the establishment of a new oil law by the central government, all the deals with the Kurdistan autonomous government will be invalid, he said.

“(The Kurds) are trying to get Korean firms involved just because they want to consolidate their rights acquired against the central government. Korean companies were just exploited by the scheme,” Noh said.  [Korea Times]

The Iraqi government had signaled their displeasure with these contracts and the Korean oil industry went ahead with them anyway.  It looks like building all those toilets in Iraq wasn’t worth it anyway.