Monthly Archives: February 2012

Exxon breaks silence over Kurdistan oil talks


(Reuters) – Exxon Mobil has disclosed its plans to explore for oil in Iraq’s Kurdistan in the company’s annual report, breaking months of silence over the investment that has outraged Baghdad.

While the Kurdistan Regional Government (KRG) in November trumpeted the deal for six exploration blocs, Exxon – the first major oil company to invest in northern Iraq – had steadfastly declined to comment since.

The KRG said the production sharing contract with Exxon was signed on October 18, 2011.

“Exploration and production activities in the Kurdistan region of Iraq are governed by production-sharing contracts negotiated with the regional government of Kurdistan in 2011,” said Exxon’s annual report, filed on February 24.

“The exploration term is for five years with the possibility of two-year extensions. The production period is 20 years with the right to extend for five years.”

The Exxon report did not go as far as to say the Kurdish negotiations had been finalized.

The U.S. major’s foray into Kurdistan infuriated the central government, which has long held that all foreign oil deals signed with the KRG are illegal. The central government initially threatened to cancel Exxon’s service contract for the supergiant West Qurna-1 oilfield in southern Iraq.

But at the end of January, Baghdad told Exxon it could keep working at West Qurna provided it froze its plan with Kurdistan. Industry sources say the company has no such intention and that it continues to press ahead quietly in Arbil.

The central government, in any case, cannot take action against Exxon over its Kurdistan bloc deal until Baghdad drafts a formal legal response, Iraqi oil officials have said.

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Iraq Blocks Exxon License Bid

Wall Street Journal – February 13th 2012

U.S. energy giant Exxon Mobil Corp. will be barred from Iraq’s fourth oil- and gas-licensing auction because of the deals it struck with the country’s semi-autonomous Kurdistan region, a spokesman for Iraqi Deputy Prime Minister for Energy Hussein al-Shahristani said Monday.

The move comes as Iraq’s central government struggles to assert its authority over energy deals struck within its borders amid a continued lack of legislation for the sector.

The Iraqi government considers as invalid any deals signed with the Kurdistan Regional Government, or KRG, which in turn states that all and any deals it has signed comply with the country’s new constitution.

“The Iraqi government has decided that Exxon won’t be allowed to participate in the next oil- and gas-bidding round,” spokesman Faisal Abdullah told The Wall Street Journal.

Iraq is planning to auction 12 promising exploration blocks, seven of which are believed to contain natural gas, and five thought to contain crude.

The new bid round, scheduled for May, is expected to add some 10 billion barrels of crude oil and some 29 trillion cubic feet of gas to Iraq’s reserves.

However, it has already been delayed twice amid arguments on whether the contracts offered should be of the production-sharing type wanted by the explorers or the fixed-fee service contracts wanted by the government.

For the next licensing auction, Baghdad has refused to offer industry-standard production-sharing contracts, where the oil company owns a portion of the oil in the ground and can profit from its sale.

It is instead insisting on service contracts that pay companies a fixed fee for the amount of oil they produce.

The fixed-fee service contracts have worked for the redevelopment of existing oil fields in Iraq—albeit with very slim margins for the companies involved—but are unappealing for many companies facing the gamble of oil exploration, said KBC Energy Economics analyst Samuel Ciszuk.

“You don’t know what you’re going to find,” said Mr. Ciszuk. “You have all these uncertainties, the most rigid contract framework…and delays building up because of slow state decision-making.”

Mr. al-Shahristani has previously said Exxon would have to choose between its deal to explore six areas in Kurdistan and its central-government contract to develop the 370,000 barrel-a-day West Qurna Phase 1, Iraq’s second-biggest field. It has proven reserves of more than 8.7 billion barrels.

“We are still waiting for Exxon to answer our letters in which we warned that it has to choose between contracts in Kurdistan and those in southern Iraq,” the spokesman said, adding that depending on Exxon’s reply the government would make a decision about its existing contract in the south.

An Exxon media officer in the U.S. declined to comment.

In December, Iraqi Prime Minister Nouri al-Maliki met with senior Exxon executives during a visit to the U.S. and said afterward that the Irving, Texas, company had promised to reconsider its dealings with the KRG.

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Iraq Warns Total over Kurdistan Deals

Source: Reuters

BASRA, Iraq Feb 12 – Total should not sign oil deals with the Kurdistan region without Iraq’s approval, Deputy Prime Minister for Energy Hussain al-Shahristani said on Sunday, warning the French major would bear the “full consequences” if it did.

Total said on Friday said it was considering possible investments in semi-autonomous Iraqi Kurdistan, which is locked in a long-standing feud with the central government in Baghdad over who controls the OPEC country’s oil rights and territories.

Exxon Mobil became the first oil major to sign up with Iraqi Kurdistan late last year, prompting Baghdad to reject that deal as illegal and threaten to end Exxon’s contract for the West Qurna-1 oilfield in the south of the country.

“The position of the Iraqi government will be the same as with the other oil companies, that no company has a right to sign a contract without the approval of the central government of Iraq,” Shahristani told Reuters when asked about a possible Total deal with Kurdistan.

“Any such contract has no standing with the Iraqi government, and the companies have no right to work on the Iraqi territories and they bear the full consequences.”

Shahristani was speaking after Iraq opened a new Gulf crude export outlet in the southern oil hub of Basra on Sunday, clearing the way for Baghdad to increase exports by around 300,000 barrels per day soon after crude begins loading.

Recovering after years of war and sanctions, Iraq signed deals with major oil companies like Shell, Exxon and BP to develop its southern oilfields.

Exxon has yet to reply to Baghdad over its decision to move into Kurdistan.

But Shahristani said the U.S. major would not be able to participate for now in Iraq’s fourth energy bidding round because of its agreements with Kurdistan, which has its own regional government and military force.

“Exxon was informed about the Iraqi government position clearly and openly. They asked for some time, and we are waiting for their final answer to inform them of our final decision,” Shahristani said.

“But right now they are not qualified to participate in the fourth bidding round,” he said.

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SONY Opens First Iraqi Showroom in Erbil

February 9th 2012

Japanese electronics group Sony has opened its first showroom in Iraq in the city of Erbil. The outlet will have the brands’ latest electronics on sale and will also provide maintenance services, according to the director of Sony in Erbil.

“[Sony] will also expand rapidly in Iraq, including the opening of other branches in Baghdad and Basra in the near future,” said Ihsan Mohammed.

He added that the economic development and excellent security conditions in the Kurdistan Region prompted Sony to open its first showroom in Iraq in the city of Erbil.

Baghdad no legal ground to cancel Exxon deal

Reuters January 31st 2012

Baghdad has no legal right to cancel a major oil contract with Exxon Mobil in retaliation for its involvement in semi-autonomous Kurdistan, the head of Iraq’s parliamentary oil and energy committee said on Tuesday.

“There are no blacklists in parliament,” said Adnan al-Janabi on the sidelines of an oil conference in London.

Exxon became the first major to move into the northern Kurdish region in mid-October when it signed a contract for six exploration bLocks with Kurdish authorities. The Kurdistan Regional Government is locked in a feud with the Arab-dominated central government in Baghdad over territory and oil rights.

The Iraqi oil ministry has said Exxon’s deal was illegal and could result in termination of its contract to develop the major West Qurna Phase One oilfield in the south.

“The contracts (signed) by the central government and the Kurdish region are not fully constitutional. We need to pass the oil law to set up the federal council, which can then approve all of the contracts,” Janabi said.

OPEC member Iraq is still struggling to pass a modern oil and gas law to help settle disputes, including those surrounding oil production-sharing contracts signed by the KRG with foreign companies.

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