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

Another factor of inconveniency is the recent call to declare Salahudin governorate as “region” with possible spillover to other governorates/ provinces. A third factor is the negotiation that has been going on between the government and KRG regarding the oil and gas law, would be impacted by this move.

Fourthly, the domestic political climate among and between the main political factions and blocks within the government and the parliament are at its low. Finally, the PM, Mr. Nuri Al Maliki is about to embark on a crucial visit to the White House to usher in a new phase of the relationship between the two countries. Surely this action by ExxonMobil would be a distracting item on the discussion table.

But what can the government do? It has limited options but none is easy or convenient, though the relationship with ExxonMobil might get sour, or even deteriorate rapidly.

At one extreme, the government keeps quiet, lets it go and ignores the three warning letters, which its ministry of oil sent to ExxonMobil.

This would be interpreted as tacit acquiescence of what ExxonMobil have done. Other companies could follow-suit rapidly. The implication is that government loses face with regards to its declared blacklisting policy, and practically put an end to such a policy. Two types of contracts (e.g., service contacts and production sharing contracts-PSCs) became reality. The oil and gas law would recognize this reality, and all KRG ‘s PSCs would be recognized and legalized easily. Other governorates would claim similar status for independently concluding their own petroleum upstream contracts, with big and small foreign oil companies occupying the driver’s seat.  The final outcomes would be no national petroleum policy, internal resource-conflicts, collapse of central authority and the beginning of disintegrated Iraq.

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

  1. dario_kurd 24th November 2011 at 18:09 #

    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.