Fallout from ExxonMobil/KRG Continues

The fallout from the agreement between the Kurdistan Regional Government (KRG) and ExxonMobil to explore six blocks in Kurdistan continues to be felt.

According to a report on Friday by Radio Free Europe/Radio Liberty, the U.S. government-funded news outlet, Iraq’s central government said it had settled the oil dispute with the KRG with an agreement that would open the door to international oil companies operating in the Kurdish region without penalty from Iraq.

But a statement on Saturday from the media office of Hussain al-Shahristani, the country’s deputy prime minister for energy affairs, said “The Iraqi government will treat any company breaching its laws in the same way it has treated similar companies in the past. The ministry of oil has informed Exxon Mobil of this position.”

“Some media cited a story saying that Vice President for Energy Affairs Hussain al-Shahristani had approved that a U.S. company operating in southern Iraq explore oil in the Kurdistan province,” the ministry said. “We affirm that this story is not true altogether.”

The KRG's Natural Resources Minister, Ashti Hawrami, said on Sunday "It is a binding contract ... It was signed completely on the 18th of October 2011". It was the first official confirmation from the KRG. Exxon has yet to comment on the deal.

The British Government also entered the quagmire on Sunday when Michael Aron, British ambassador to Iraq, called on Iraq to "resolve its differences [with KRG] and reach an agreement over hydrocarbon laws and revenue sharing ... The British Government would like a climate where British companies can work in and exploit the opportunities, with the Iraqi government and the KRG, across the whole of Iraq ... The British embassy was imploring both sides to resolve this issue and I would support that request."

The Independent newspaper reports that Mr Aron spoke after Mowaffaki al-Rubaie, former national security adviser to Iraq and member of the Iraqi parliament, warned that the Exxon Mobil deal "will not help the delicate negotiation of hydrocarbon law in Baghdad. We believe the Federal government will challenge Exxon Mobil".

For further analysis from our expert blogger, Ahmed Mousa Jiyad, please click here.

(Sources: AKnews, The Independent, The Guardian, Bloomberg, BusinessWeek)

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