ExxonMobil Signs Kurdistan Exploration Contracts

Exxon Mobil has signed oil and gas exploration deals with Iraq's Kurdistan, an adviser to the Kurdish government said, prompting warnings from Baghdad that the bold step could jeopardise the company's future in the country. Exxon declined to comment, and experts speculated the move could indicate Baghdad and the Kurdish leaders are nearing agreement on new rules for oil companies seeking to tap into Iraq's vast oil reserves.

A senior Iraqi oil official said the central government knew that Exxon was in talks to explore in the region and had warned that any deal with the Kurdish Regional Government (KRG) could result in the termination of Exxon's deal to develop the giant West Qurna field. Baghdad and the government of the semi-autonomous northern Kurdish region have longstanding disputes over oilfields. Baghdad deems contracts between the KRG and foreign oil companies to be illegal.

"The KRG has for the last few months been in discussions with a number of major oil companies. This resulted in the recent signing by Exxon Mobil of contracts to explore in six blocks," KRG adviser Michael Howard said.

He did not disclose details of the contracts or the locations of the blocks.

Kurdish leaders are seeking to grow output from the region from its current level of about 120,000 barrels per day and say they have fields holding at least 45 billion barrels of oil. Iraq's total oil production is expected to reach about 3 million bpd by year-end.

Abdul-Mahdy al-Ameedi, director of the Iraqi oil ministry's contracts and licensing directorate, said the government sent three letters to Exxon Mobil last month.

"All three letters were clear," Ameedi told Reuters. "The signing of any contract with the Kurdistan Regional Government without the approval and the knowledge of the Iraqi central government and the oil ministry will be considered illegal."

Ameedi said he could not confirm that Exxon had signed the contracts.

Exxon, with Royal Dutch Shell, clinched a 20-year deal in 2009 to develop West Qurna Phase One, an 8.7-billion-barrel field in southern Iraq, beating out Russian, French and Chinese rivals.

"The company, according to Iraqi law, could be disqualified from having any contracts or any work with the oil ministry and it could result in the cancellation of the West Qurna Phase One contract, (with Exxon) to bear all the legal consequences of their action," Ameedi said.

"West Qurna Phase One contract terms are very clear, and a clause in the service contract says if the company violates Iraqi laws then its contract could be terminated," he said. "Any deal between the Kurdish region and Exxon Mobil would be a clear violation of the West Qurna contract."

Exxon Mobil shares were up 1.2 percent to $79.65 on the New York Stock Exchange, in line with gains by other large oil companies.