Iraq Says Exxon Mobil Freezes Kurdistan Deal

Source: Reuters 3/16/2012, Location: Middle East

Iraq's government has received a letter from Exxon Mobil Corp saying the U.S. oil major had frozen its deal with the country's semi-autonomous Kurdistan region, Iraq's oil minister Abdul Kareem Luaibi said.

The U.S. Company had angered Baghdad by signing an exploration deal with the Kurdistan Regional Government (KRG), which the central government considers illegal.

"We received a letter from Exxon on March 5 saying they are freezing the contract with the Kurds," Luaibi told Reuters on the sidelines of a news conference.

He said the Iraqi government had not yet reversed its intention to exclude Exxon Mobil from its next oil bidding round. When asked whether it had done so, he replied: "Until now, no."

"But maybe in a few days" Baghdad could change its position, if Exxon gave more clarification of its decision, he said.

Iraq earlier this month set a deadline of a few days for Exxon to explain its position on oil agreements signed with the Kurdish region, a government spokesman said at the time.

The Kurdistan Regional Government (KRG) announced in November the signing of a deal for six exploration blocs with Exxon, the first major oil company to deal directly with the Kurds in northern Iraq.

Iraq's central government has said that deal could jeopardise Exxon's contract to develop the supergiant West Qurna-1 oil field in southern Iraq.

A spokesman for Exxon declined to comment.

Exxon Chief Executive Officer Rex Tillerson told Wall Street analysts earlier this month that his company is committed to exploring in Iraq's autonomous Kurdish region, as well as to expanding its West Qurna output in southern Iraq.

Asked in the news conference to comment on the stance of France's Total, which said in February it was considering possible investments in Kurdistan, Luaibi said through a French interpreter: "The situation is clear: we do not accept, we cannot authorize companies to sign bilateral agreements with the regional authorities."

Luaibi also said Iraq would reach oil output of 3.4 million barrels per day by the of this year, just days after the country's oil production exceeded 3 million for the first time in more than three decades.

"By the end of the year we will manage to produce 3.4 million and to export 2.6 million barrels per day," he said, adding output by the end of 2017 could reach 10-mln bpd.

Iraq's oil and gas fields have suffered from decades of neglect because of war and economic sanctions. In the past three years it has done a raft of deals with foreign oil firms, and more deals are on offer that would make it the world's biggest source of new oil production over the next several years.

However, Baghdad has offered fee-for-service contracts rather than the production-sharing agreements which foreign firms consider more lucrative.

The Kurdish region has offered production-sharing deals to firms willing to do business directly with it, but before Exxon's deal last year, only smaller firms had agreed to participate.

Shares of Exxon closed up 35 cents, or less than 1 percent, at $86.44 on the New York Stock Exchange .

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