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Iraq Warns Exxon on Kurdish Deals Amid Plans for BP Development

January 27, 2013

Iraq Warns Exxon on Kurdish Deals Amid Plans for BP Development

A gas flare burns in a field close to the northern oil-rich city of Kirkuk. Photographer: Marwan Ibrahim/AFP/Getty Images

Iraq’s oil minister asked Exxon Mobil Corp. (XOM:US) to stop dealing with Kurds if it wants to work with the central government even as he proceeded with plans for BP Plc (BP/) to develop fields in northern areas claimed by the Kurdish authorities.

Chevron Corp. (CVX:US), Total SA (FP) and Exxon, which operates the West Qurna-1 oil field in southern Iraq, are among companies that have angered the central government with proposals to explore in the Kurdish area. While the Baghdad authorities don’t recognize contracts signed by the semi-autonomous Kurdistan Regional Government without their permission, foreign investors say Kurdish authorities offer them more attractive terms.

“Any company that signs deals without the approval of the central government, we don’t deal with them,” Oil Minister Abdul Kareem al-Luaibi said in Baghdad today. “We can’t allow Exxon to step over the constitution. It can’t continue to work in both places at the same time, they have to choose to work either in Iraq or in Kurdistan. We are waiting for a final answer in the coming few days.”

The central government and the Kurds are entangled in a feud over disputed land and the sharing of energy revenue. The Kurdistan Regional Government halted exports of crude by pipeline last month, with shipments currently limited to volumes being trucked to Turkey. Iraq is seeking to boost oil sales to rebuild the economy after decades of wars and sanctions.

Disputed Territory

In turn, the Kurdish authorities said in a Jan. 17 statement that the central government would be acting illegally if it proceeds with a plan to allow BP, Europe’s second-biggest energy company, to work on oil fields in disputed territory. BP made a “good offer” to develop the Kirkuk fields and the Oil Ministry in Baghdad has sent the proposal to the government energy committee for approval, al-Luaibi said today.

Iraq started to export crude through a second single-point mooring facility in the south of the country, al-Luaibi told reporters today. The nation also signed an agreement with Kuwait Energy Co. and Dubai-based partner Dragon Oil Plc (DGO) to explore and develop oil in Block 9 along Iraq’s border with Iran.

Kuwait Energy plans to invest $125 million in the field as the company is optimistic about finding commercial quantities of oil, Chief Executive Officer Sara Akbar said at a ceremony in Baghdad. Iraq replaced Turkiye Petrolleri AO with Kuwait Energy for the project to develop the block in November, without giving any public explanation. The agreement is one of four licenses awarded since an energy auction last year.

Iraq holds the world’s fifth-largest crude reserves, according to BP’s Statistical Review of World Energy. The nation is the biggest producer, after Saudi Arabia, in the Organization of Petroleum Exporting Countries.

To contact the reporters on this story: Kadhim Ajrash in Baghdad at kajrash@bloomberg.net; Khalid Al-Ansary in Baghdad at kalansary@bloomberg.net

To contact the editor responsible for this story: Stephen Voss at sev@bloomberg.net


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Companies Mentioned

  • XOM
    (Exxon Mobil Corp)
    • $103.92 USD
    • 0.38
    • 0.37%
  • CVX
    (Chevron Corp)
    • $133.09 USD
    • 0.51
    • 0.38%
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