Exxon Seeks to Quit Flagship Iraq Oil Project

Source: Reuters 10/18/2012, Location: Middle East

ExxonMobil wants to leave its giant oilfield project in southern Iraq, diplomatic sources said, in a move likely to aggravate the country's internal tensions and hamper Baghdad's ambitious energy expansion plans. The desire of the world's largest publicly traded oil company to quit was due to prospects of slim profits from the estimated $50 billion West Qurna-1 project, the sources said. An exit from the project would contrast with a deal Exxon signed a year ago to explore in Iraq's autonomous northern Kurdish region, where incentives are better.

Baghdad deemed the Kurdish deal illegal and promised to punish Exxon by ripping up its contract for West Qurna-1, which has reserves of 8.7 billion barrels.

Executives at the company this week told U.S. State Department officials it was looking to sell its 60 percent stake in the project, diplomats from two Western countries said.

"Exxon is telling Baghdad: 'We are letting you know we're looking to leave,'" one of the diplomats said. "They are shopping around and looking at all the options."

The company declined to comment, as did the U.S. State Department.

The departure of Exxon from southern Iraq now hinges on its ability to find a company willing to buy out its stake in West Qurna-1, industry sources say.

"If they can find the right buyer, they will pull out," said an industry executive. "It's an unusual move for Exxon. They usually don't give up."

Industry sources said Baghdad is keen to replace Exxon with companies from Russia, or even China, to teach Western oil majors a lesson. This could alter the diplomatic and political influences in Iraq but, technologically, Chinese and Russian companies may have less to offer the oil sector.

U.S. Secretary of State Hillary Clinton did not comment on Exxon during a speech on energy diplomacy at Georgetown University.

But in response to a question about whether Russian companies might dominate in Iraq if the Exxon leaves the project, she was not worried. Russian, American, French and Chinese companies all will be competing in Iraq and will be operating within the economic marketplace the global market place sets, she said.

Clinton praised Iraq's progress in boosting oil output by 900,000 barrels per day since 2010 to 3.2 million bpd today as a "major Iraqi success story helped by the (U.S) Departments of State and Energy".

The State Department added an energy diplomacy office last year, which has helped Iraqis identify infrastructure bottlenecks, improve investment plans, and get oil to market, she said.


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Related Categories: Accounting, Statistics  Acquisitions and Divestitures  Asset Portfolio Management  Economics/Financial Analysis  General  Industrial Development  Insurance  Investment  Mergers and Acquisitions  Risk Management 

Related Articles: Accounting, Statistics  Acquisitions and Divestitures  Asset Portfolio Management  Economics/Financial Analysis  General  Industrial Development  Insurance  Investment  Mergers and Acquisitions  Risk Management 


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