Nov 14, 2011
ERBIL // Iraqi Kurdistan’s young oil industry is set for a shake-up as the first move by an oil major sends ripples across business dealings and political negotiations.
ExxonMobil, based in Houston, has agreed to explore six blocks in the semiautonomous region in northern Iraq, home to a spectrum of small to mid-size operators from more than 17 countries, according to the regional government based in Erbil.
That landscape is to shift as the move by ExxonMobil, which also pumps oil in southern Iraq, puts pressure on Baghdad to come to a political agreement with Erbil and spurs majors to shoulder their way into the north and Kurdish producers to band together.
“This will make a dynamic change to the region and in the days ahead there will be a lot of consolidations and mergers,” said Ashti Hawrami, the oil minister of Kurdistan. “It is vindicating our policies, and the ball is rolling.”
Recently the heads of DNO, the first foreign company to strike oil in Kurdistan, and Vallares, the investment vehicle that has recently agreed to merge with a Kurdish producer, have said that mergers with other regional producers would be attractive.
Until now Kurdistan’s fields – estimated by the regional government to hold more than 45 billion barrels in reserves – have remained off limits to the majors who are keen to preserve their service contracts in southern Iraq. Baghdad threatens to blacklist companies that sign contracts with Kurdistan that it deems unconstitutional, and as recently as September disqualified the American producer Hess from entering into its first exploratory block auction.
ExxonMobil signed the contract to explore six blocks on October 18, including a “prize block” near the Kurdish president’s house that had been reserved for a yet-to-be-created Kurdish national oil company, Dr. Hawrami said. ExxonMobil has yet to confirm the deal.
The Kurdish contract puts at risk ExxonMobil’s right to pump oil from the 8.7 billion-barrel West Qurna field and a lucrative contract for water injection throughout Iraq.