ExxonMobil-KRG deal: A puzzling move at a critical time

By Ahmed Mousa Jiyad. Any opinions expressed are those of the author, and do not necessarily reflect the views of Iraq Business News.

The news of ExxonMobil’s venture by signing 6-blocks PSCs with KRG could have very serious ramifications as the move is rather puzzling, it occurred and became known at critical time, and consequently caught the Iraqi government off-guard.

The company has been negotiating with KRG, directly or through intermediaries, for many months leading to signing agreement(s) in October. International sources say the Iraqi government was notified on the matter, and the Ministry of Oil had issued three letters to the company stressing that, according to regulations of the central government, any company which signs deals with the KRG wouldn’t be allowed to work in the center and south of the country, meaning ExxonMobil would risk its (with Shell) West Qurna 1 giant oilfield.

Also reliable source says, the six blocks were originally offered to Shell and ExxonMobil three each, but Shell declined the offer, and KRG gave ExxonMobil a 48 hours ultimatum before the deal was finally signed in London.

It is expected the Iraq council of Ministers meet urgently to discuss the matter and decide on the fate of the West Qurna 1 contract with ExxonMobil.

What motivated ExxonMobil to make this move despite the warning from the Ministry of Oil is a matter the company alone can answer, others could only speculate. But why a company that has the highest contract- in barrels-term, and has the leading position in a major water injection project would risk these two lucrative projects and, possibly any other future opportunities? Only time will tell!

The timing is also critical and unfavorable for the Iraqi government. American forces are, and would be fully, leaving the country by the end of the year. The government is obviously preoccupied with the implications and consequences of this withdrawal at least from security perspectives.

One Response to ExxonMobil-KRG deal: A puzzling move at a critical time

  1. dario_kurd November 24, 2011 at 6:09 pm #

    Mr sharistani’s ministry of oil has taken 10 billion of iraqi’s money since 2003 to increase oil production. however the iraqi oil production level has droped to the level bellow 2003. this is happening while today Kurdistan production capacity is 200 barrels per day from nothing in 2003. thanks to Kurdistan’s investment friendly cliamte and local gas production, the region not only solved the problem of power shortages but now have an access of power production that suppliers Kirkuk and Musil.

    so it is better for Mr sharistani to follow Kurdistan’s example to increase iraqi oil production, so pushing away world’s largest oil company hardly helps iraqi oil industry.