Iraq threatens to bar oil companies signing deal in Kurdistan region

Europe Sun Monday 13th February, 2012

BAGHDAD - Iraq government threat to bar oil majors taking up exploration activities in the autonomous region of Kurdistan from participating in its next round of oil and gas licensing auction, has failed to deter French oil giant Total or US energy giant Exxon Mobil Corp.

Exxon Mobil Corp will be barred from Iraq's fourth oil-and-gas exploration licensing auction, scheduled to be held in May, because of the deals it has struck with the country's semi-autonomous Kurdistan region, a spokesman for Iraq's Deputy Prime Minster for Energy Hussein al-Shahristani said Monday.

The Iraqi government had declined to accept any deal signed with the Kurdistan Regional Government (KRG), which has clarified that all its deals are in compliance with the country's new constitution.

Speaking in Basra on Sunday, Al-Shahristani said, "No company has a right to sign a contract without the approval of the central government of Iraq."

Despite the Iraqi central government disapproval, Total is reportedly close to reaching an agreement with the KRG authorities to explore oil in a number of fields in the southern regions of Iraq, while Exxon Mobil has already signed production sharing contract for exploration in six blocks.

Under deal signed in November 2011, the Exxon Mobil will undertake exploration in six field blocks of which three are located in the disputed areas of Kirkuk and Nineveh Provinces.

Details of Total's deal with KRG are yet to be disclosed.

A report by The Sunday Times claims that results are expected to be announced within weeks.

Energy news service Platts has quoted sources in Kurdistan who claim that the French company has already entered an agreement with the KRG to work on six blocks that have been relinquished by the smaller companies Petoil and Shamaran.

There is no confirmation of the pact from Total so far.

A number of large oil discoveries in the southern region under KRG are attracting both big and small oil companies to seek a footing despite possibilities of being blacklisted by Iraqi authorities.

Under the fourth round of oil and gas blocks auctioning in May, Baghdad plans to offer 12 exploration areas including seven for oil and five for gas.

Baghdad's excessive red tape whether in matters of tender or contracts besides the unsteady security situation in the country are some of the reasons why international companies are prepared to defy the ban threat and secure contracts in KRG, which is estimated to hold around 40 per cent of Iraq's proven oil reserves.

Last week praising prospects in KRG, Total executive chief Christophe de Margerie told reporters in Paris "It's a place where there are important oil and gas reserves and contracts."