Iraq Won't Cancel ExxonMobil West Qurna-1 Field Deal

BAGHDAD (Dow Jones Newswires), Dec. 9, 2011

Iraqi Prime Minister Nouri al-Maliki said Friday that Baghdad wouldn't terminate ExxonMobil's contract to develop the West Qurna-1 oil field in southern Iraq as punishment for signing a deal with the country's semi-autonomous Kurdistan region, with whom Baghdad has a long-running dispute over land and the sharing of oil resources.

"We haven't cancelled its contract in the south," said Maliki in an interview with the Wall Street Journal ahead of a scheduled state visit to Washington next week. "We are looking for a way for its [Exxon Mobil's] other contracts in any area to be within the legal contexts, but as for cancelling its contract in the south, no."

Maliki also said that Exxon has "frozen" its controversial contract with the KRG, which was announced in November, and suggested that his government was willing to find a way to ultimately make the deal work if negotiations were restarted with the involvement of the Ministry of Oil.

"It [the contract] has a legal violation, it doesn't work unless Exxon comes back and negotiates with the Ministry of Oil in the presence of a representative of the Kurdistan region, then possible," Maliki said. "Even Exxon I think has frozen the project, now the contract is frozen and we will try to find a formula to remedy it."

It wasn't immediately clear if Maliki's comments were motivated by an eagerness to avoid any potentially protracted legal battle with oil major, which could cast a shadow over Iraq's existing deals with other energy giants and its hugely ambitious plans to quadruple production to 12 million barrels a day by 2017.

Exxon is currently producing 370,000 barrels a day at West Qurna-1 under a central government service contract. The government had warned the company that it could lose its contract to develop the field, which has proven reserves of about 8.7 billion barrels, for signing the deal for six exploration blocks in the north with the Kurdistan Regional Government, or KRG.

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

An Exxon Mobil media officer in the U.S. declined to comment. So far the company has said nothing about the deal.

KRG Minister of Natural Resources Ashti Hawrami couldn't be reached for comment, but another well-placed Kurdish source said the KRG is "unaware of anything of this nature.

"We are working within Iraq's Constitution for the benefit of the whole of Iraq," he said, on condition of anonymity because he was unauthorized to discuss the deal.

The KRG and the Baghdad government are at loggerheads over scores of oil deals that the KRG signed with international oil companies. Baghdad has said they are nul and void because they need approval by the central government, while the Kurds say they are in line with the country's new constitution.

Baghdad has also blacklisted companies that maintain deals with the Kurds, excluding them from working elsewhere in Iraq. Among those is U.S. oil firm Hess, which was barred in September from competing in a fourth energy auction scheduled by the Ministry of Oil for next year.

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