Exxon Asks for 'Few More Days' on Iraqi Kurdistan Deal

Exxon Mobil has asked the Iraqi central government to give it "few more days" to decide whether or not it will cancel an exploration deal with Iraqi Kurdistan, a deal which Baghdad strongly opposes, a spokesman for Iraq's Deputy Prime Minister for Energy Hussein al-Shahristani said Tuesday.

Iraq has essentially asked the U.S. giant to choose between its deal with the semi-autonomous northern Iraqi region and its central-government contract to develop the 370,000 barrels-a-day West Qurna Phase 1, and the impasse has also led Exxon to be barred from Iraq's fourth oil-and-gas licensing auction, scheduled for May.

The Iraqi government considers as invalid any deals signed with the Kurdistan Regional Government, or KRG, which in turn insists that such deals comply with the country's constitution. The KRG has signed nearly 50 oil-and-gas deals with international oil companies, mostly second-tier or wildcat explorers, and was hopeful that Exxon's presence would entice other majors.

"[Exxon] has asked the Deputy Prime Minister to give it some more days in order to decide its stance on the contract it signed with Kurdistan," Faisal Abdullah, a spokesman for the Iraqi Oil Ministry, told Dow Jones Newswires. Abdullah said Exxon's request was submitted last week by a company representative who met with Shahristani in Baghdad.

The Iraqi government has sent Exxon Mobil three letters asking it to choose between its deal to explore six areas in Kurdistan, and its contract to develop West Qurna Phase 1, which has proven reserves of 8.7 billion barrels.

"The central government is waiting for Exxon to respond to our letters and on the light of Exxon's response, Baghdad would take a decision," Abdullah said.

Last month, Iraq barred Exxon from bidding in its fourth licensing auction at which 12 promising exploration blocks are up for grabs. Exxon has also been excluded from a contract worth up to $10 billion to build a joint water-injection project in southern Iraq.

In December, Iraq's Prime Minister Nouri al-Maliki met with senior Exxon executives during a visit to the U.S., and said afterward that the Irving, Texas-based company had promised to reconsider its dealings with the KRG.

Some of the blocks in the Exxon-KRG deal are in a hotly contested oil-rich territory claimed by both the central government and the KRG, stretching from the Iranian border in the east and to the Syrian border in the northwest.

Baghdad has already blacklisted companies that maintain deals with the Kurds, excluding them from working elsewhere in Iraq. Among those is New York, N.Y.-based Hess Corp. (HES), which has also been barred from competing in the fourth energy auction.

Tuesday's comments by the Iraqi government also led to a large sell-off in shares of Gulf Keystone Petroleum Ltd. (GKP.LN), which is active in Iraqi Kurdistan. The London-listed explorer has been seen as a potential takeover target following Exxon Mobil's agreement with the KRG, and analysts said the sharp fall in its share price was a sign that some speculative takeover premium was leaking away.

(Isabel Ordonez in Houston and James Herron in London contributed to this item.)

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


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Ali Taie | Mar. 9, 2012
"Tehran of Iran" any one have any problem with Iraqi government use these words despite that KRG have more cooperations and economic relationships with Iran more than the Baghdad. the other thing is Kurdistan also is much more tribal community specially in Erbil that have a governor similar to Saddam and his Tikrit. please live in Iraq before talking like this and baghdad have to do strong action towards Exxon

Randy | Mar. 7, 2012
Exxon has committed a cardinal sin based on the flawed advice it was given by those it employs who profess expertise. Exxon needs to understand that it is not actually dealing with the central Baghdad Government; rather, it is dealing directly with Tehran. Tehran opposes any Northern Autonomy under the stewardship of anyone other Baghdad…I mean Tehran. Exxon’s only saving grace would have been dealing with the populace directly rather than their government. Iraq is a proud tribal society, something Exxon continuously fails to understand. The central government’s policies come second to the word of honor from Tribal Sheikhs and Tehran has no say over the tribes of both, the South and the North of Iraq. Had Exxon been amenable, agile and receptive to such social realities, they would not have found themselves in this predicament. Advise that Exxon begin back off the Northern deals for if they do not, they will lose on both fronts and find their logo expelled from Iraq.

Senior Process Engineer | Mar. 7, 2012
Exxon is playing a very dangerous game. US military is moving back to the KSA and Kuwait. That will go over like gang busters. Exxon signing contracts with the Kurds is inking certain disaster. This is no time to be playing around over here. Exxon should have done a lot more due diligence before signing contracts. The future is very uncertain. Right now the US power in the region is looking weaker and weaker as time goes on. Exxon is just asking for some serious backlash.

Ali | Mar. 6, 2012
Dont cave in Exxon to Camels. Shame on you if you do so. Stand to your value.

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