Exxon Mobil Corp. is in talks to sell its stake in a contract to develop a multibillion-dollar oil project in southern Iraq as it gears up to start drilling for oil in the Iraqi Kurdistan region, people familiar with the matter said Thursday.
The U.S.-based energy giant's move to exit southern Iraq and push forward with its plans in the northern Kurdistan region suggests the central government's efforts to keep ExxonMobil operating solely in southern Iraq are likely to fail. This comes as talks between the Kurdistan Regional Government, or KRG, in Erbil and the federal government in Baghdad, aimed at resolving differences over oil rights, appear to have stalled again after a brief period of progress.
ExxonMobil is negotiating with international oil companies to take over its service agreement to develop the massive West Qurna-1 oil field in southern Iraq, one person familiar with the Iraqi oil ministry and another person familiar with ExxonMobil's operations in Kurdistan said Thursday.
Meanwhile, ExxonMobil is planning to start exploratory drilling in the semi-autonomous region of Kurdistan in northern Iraq as soon as early 2013, people with knowledge of ExxonMobil and the Kurdistan Regional Government said.
"Exxon has informed the [central] government that it wants to sell its assets at West Qurna-1," the person familiar with the Iraqi oil ministry told Dow Jones Newswires. The company is negotiating with several international oil companies to sell its entire 60% stake at West Qurna-1, he said.
Anglo-Dutch oil and gas company Royal Dutch Shell PLC (RDSB.LN) has a 15% stake in the West Qurna-1 development contract, while the remaining 25% is owned by the Iraqi state oil company.
ExxonMobil declined to comment when asked about the talks to exit southern Iraq and the plans to begin drilling in Kurdistan.
As ExxonMobil seeks to withdraw from southern Iraq, the firm is planning to start drilling in Kurdistan, northern Iraq, after delaying such plans for months in order to resolve a dispute with Baghdad over deals signed with the KRG.
"Yes, they are preparing to start drilling in Kurdistan at the beginning of next year," the person familiar with ExxonMobil's operations in Kurdistan said.
ExxonMobil has already ordered the purchase of oil well casing heads and is negotiating a contract with an oil-services firm to start drilling in Kurdistan, said another person familiar with ExxonMobil's operations in Kurdistan. "They have opened an office in Erbil," he said.
"We know they have been active," an executive at a Western oil company in Kurdistan said about ExxonMobil.
Two of the people familiar with the situation said that ExxonMobil would start drilling operations in the Al-Qosh block near Mosul, in one of the disputed areas that have inflamed tensions between Baghdad and Erbil.
In November last year, ExxonMobil provoked howls of protest from Baghdad when it became the first major international oil company to sign petroleum contracts with the Kurdistan Regional Government despite Baghdad's threats to expel it from a contract in southern Iraq. ExxonMobil 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.
Three of the blocks are in areas disputed by Erbil and Baghdad.
Earlier this year, U.S. oil giant Chevron Corp., France's Total SA and the oil-producing arm of Russia's OAO Gazprom all followed ExxonMobil's lead by striking their own deals in Kurdistan.
The Iraqi central government has excluded companies that signed deals with the KRG from participating in auctions for future oil-exploration rights in southern Iraq.
Copyright (c) 2012 Dow Jones & Company, Inc.
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