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ExxonMobil Sets December for Bids for Iraq Contract Stake

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ExxonMobil Sets December for Bids for Iraq Contract Stake

BAGHDAD - U.S. energy company Exxon Mobil Corp. has asked interested oil companies to submit offers in December to buy its stake in a contract to develop a multibillion-dollar project in southern Iraq after upsetting Baghdad by signing a deal last year with the Kurdistan region in northern Iraq, Iraq's deputy prime minister for energy affairs said Thursday.

Exxon Mobil, which is also gearing up for plans to explore for oil in Iraq's semi-autonomous Kurdish region, has informed Iraq of its wish to sell its 60% stake in West Qurna-1.

"Exxon has started negotiations with companies and it has set December to receive bids from them," Hussein al-Shahristani told Dow Jones Newswires in an exclusive interview.

"We are expecting the sale to be finalized by the end of this year," Mr. Shahristani said.

Exxon Mobil, however, can only sell its stake to the firms that the Iraqi Oil Ministry has prequalified to win oil and gas contracts in Iraq. "The buyer should be qualified in accordance with the criteria we have set up and Exxon needs to secure the Iraqi government's approval of the buyer before it sells its stake," Mr. Shahristani said.

Earlier in the day, the head of the largest Iraqi oil production company, the South Oil Co., said that Exxon wanted to share data on West Qurna-1 with companies like BP PLC, Eni SpA, Lukoil Holdings and other companies in order to sell part of its stake. The deputy prime minister, however, said that Exxon Mobil would sell all of its stake.

At West Qurna-1, Exxon and minority partner Royal Dutch Shell PLC have raised output to nearly 400,000 barrels a day from 244,000 barrels a day when the pair signed up for the project in early 2010. The contract targets eventual output of 2.8 million barrels a day.

The venture gets some $1.90 for each extra barrel of oil produced above the 244,000 barrel-a-day baseline.

The withdrawal of Exxon from the gigantic West Qurna-1 oil field would not affect Iraq's production increase plans, Mr. Shahristani said. "Exxon's departure from West Qurna-1 won't have any effect on our production targets and all [oil] contracting companies working in Iraq are working at high efficiency to up output." Mr. Shahristani said that Iraq's crude oil production is expected to hit 3.6 million barrels a day in 2013, from above three million barrels a day now. He said Iraq is planning to export some 2.9 million barrels a day in 2013, up from the current 2.6 million barrels a day.

In November last year, Exxon Mobil provoked protest from Baghdad when it became the first major international oil company to sign petroleum contracts with the Kurdistan Regional Government, or KRG, despite Baghdad's threats to expel it from a contract in southern Iraq. Exxon Mobil signed a deal to develop six blocks with the KRG, which is locked in a feud with the Arab-dominated central government over land and oil rights.

Earlier this year, U.S. oil company Chevron Corp., France's Total SA and the oil-producing arm of Russia's Gazprom all followed Exxon Mobil's lead by striking their own deals in Kurdistan.

Mr. Shahristani said that Gazprom was given a short time to choose between its Kurdish contract and that of Badra oil field in eastern Iraq. "We have informed Gazprom either it cancels its contracts with Kurdistan, not freezing them, or withdraw from the contract signed with us."

He didn't specify the time given to Gazprom, however.

The deputy prime minister also accused the KRG of violating an agreement reached with Baghdad in September to resume crude oil exports from the region in return for Baghdad paying contracting companies.

The KRG and the federal government in Baghdad had resolved issues relating to oil payments to foreign companies producing crude oil in the region and Kurdish control of oil exports from Kurdistan. According to the agreement, Baghdad would pay the KRG 1 trillion Iraqi dinars ($841.4 billion), of which some IQD650 billion was already paid.

Also the agreement calls on the KRG to export some 200,000 barrels a day from Oct. 1 to the end of this year. Next year, the Kurds need to export some 250,000 barrels a day.

The agreement, however, resolves only part of a broader impasse between Baghdad and Kurdistan about the control of oil resources and territory.

"They are exporting only between 160,000 and 170,000 barrels a day so far, which is a violation of the agreement," Mr. Shahristani said.

He also said that an oil price between $100 and $120 a barrels is acceptable for Iraq and it wouldn't harm world economic growth.

Mr. Shahristani accused some members, whom he didn't name, of the Organization of Petroleum Exporting Countries of exceeding the production ceiling set by the organization.

Copyright (c) 2012 Dow Jones & Company, Inc.

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