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By John Lee.

Russian’s LUKoil is said to be studying documents on Iraq’s West Qurna-1 oil field, with a view to possibly taking over ExxonMobil's stake.

Bloomberg quotes Chief Executive Officer Vagit Alekperov (pictured) as saying that the company will make a decision on possible participation in the project by the end of the year.

It already holds 75 percent of the adjacent but separate West Qurna-2 "super giant".

“We are looking at the main issue now, synergy,” Alekperov told reporters today in Moscow. “What economic synergies the company will get if these two projects work together.”

In a separate report, LUKoil is said to have bought oil from Kurdistan in defiance of Baghdad.

(Source: Bloomberg)

By Amir Hassan Fayad.

This article was originally published by Niqash. Any opinions expressed are those of the author, and do not necessarily reflect the views of Iraq Business News.

Iraq and Russia have been getting cosy lately with high ranking visitors and multi-billion dollar arms deals. Is this friendship just a business opportunity? Related to events in Syria or Iran? Or something more sinister?

Iraqi Prime Minister Nouri al-Maliki’s visit to Russia as well as the making, then breaking, of a multi-billion dollar arms deal with Russia has led to plenty of questions. These include questions on the state of the Russian-Iraqi friendship, its importance to both partners and its significance in geo-political terms.

Over the past century, the relationship between Iraq and Russia may best be described as inconsistent. Or possibly as similar to the kind of relationship that a small business might have with a big, multi-national business. It makes no sense for the big business – Russia – to sacrifice its interests and alliances with other big businesses – for instance, in the West – just to make deals with the small business.

Meanwhile inside Iraq, it feels like since the 2003 US-led invasion that toppled the regime of former Iraqi leader Saddam Hussein there hasn’t been much of a cohesive, federal foreign policy. At least, not a unified one. We hear plenty of diverse opinions from the various political blocs but there is really no single spokesperson or national policy.

The recent debacle of the Russian arms deal is an excellent example. Different parties have said different things about the deal and it’s hard to know who is correct. Firstly, the Prime Minister’s office revealed there were allegations of corruption that needed to be investigated before the deal could be concluded. Other MPs accused the Iraqi deal makers of taking almost 10 percent off the total amount of the contract and profiting from it.

By Abdul-Khaleq Dosky.

This article was originally published by Niqash. Any opinions expressed are those of the author, and do not necessarily reflect the views of Iraq Business News.

The tension between Iraqi Kurdistan and the leadership in Baghdad doesn’t seem to have diminished lately. NIQASH asked the Iraqi Kurdish why the Russians and Exxon Mobil are making things worse and why the planned national reconciliation conference won't work.

For some time now, the important Kurdish bloc in the Iraqi Parliament has been at loggerheads with the current Prime Minister Nouri al-Maliki’s bloc.

Al-Maliki has been accused of consolidating power at the expense of other parties and not sticking to promises made when he formed his government in 2010. In fact, because of this, various political groups, including the Iraqi Kurds, came together earlier this year to make plans to oust him. These failed however and the most recent aim was to hold a conference for national reconciliation that would unite all political groups and get the country moving forward.

Over the course of the past year, Kurdish politicians have gone from demanding that the PM be removed from power to being the prime movers behind conciliation.

NIQASH talked to Muayad al-Tayeb, Baghdad-based spokesperson for the Kurdish voting bloc in Iraq's federal parliament, about recent events that appear to have worsened the relationship between Iraq’s Kurds and the current Prime Minister recently.

By Padraig O'Hannelly.

On the day Iraq announced that Exxon Mobil wants to abandon its business in southern Iraq in favour of potentially more profitable contracts in Iraqi Kurdistan, the Oil Ministry has cancelled a major exploration deal with Turkey's TPAO.

The reasons were described as "non-technical", with the decision coming from the cabinet; the move is widely believed to be a reaction to the political disagreements between the two counties, specifically Turkey's refusal to hand over Deputy Prime Minister Tareq al-Hashemi to face a death sentence, Turkish military incursions into Iraq, and a difference of opinion on the Syrian uprising.

Given the significance of Turkey to Iraq's economy, allowing political differences to get in the way of mutually beneficial commercial deals looks very strange -- Turkey is Iraq's biggest supplier of imported goods, and one of its top providers of foreign direct investment (FDI).

While the latest news relates to just one, state-owned, Turkish company, and to only one of that company's deals, this action will be perceived as arbitrary and capricious, and will be viewed negatively when assessing the risks of doing business in Iraq.

By John Lee.

Exxon Mobil has informed the Iraqi government that it wants to pull out of the $50-billion West Qurna-1 oilfield project, according to a report from Reuters.

Abdul Mahdi Al Ameedi, director of the oil ministry’s Petroleum Contracts and Licensing Directorate (PCLD), said:

"Exxon has stated in its letter that it has started discussions with some international oil companies to sell its stake."

Another oil official said that Baghdad plans to reply to the letter from Exxon by Sunday, but it was unclear who would replace Exxon at the 400,000-bpd oilfield, which it works with minority partner Shell.

Some sources have suggested that Baghdad wants to replace Exxon with companies from Russia or China; Russia's LUKoil and Gazprom Neft are already working in Iraq, and LUKoil, which already runs a project to develop West Qurna-2, has said that it lacks the resources to take on a project like West Qurna-1 for the moment.

Earlier today, LUKoil signed the contract for the exploration of Block 10.

(Source: Reuters)

By John Lee.

Paolo Scaroni, the CEO of Italian oil and gas company Eni, spoke out on Wednesday to complain about the difficulties of doing business in Iraq.

"Our adrenaline rush now is not what it was when we entered Iraq", he said ,"[it's] more complex than we first thought."

On one hand, we could disregard this as a minor grumble -- he is still committed to ploughing $18 billion into the Zubair oilfield, so clearly, all things considered, he'd rather be in Iraq than out of it.

But on the other hand, it would be foolish of the Iraqi government to ignore the honest assessment of one of its biggest customers; when even a company as powerful as Eni complains of bureaucracy, sub-standard infrastructure, and political problems, then the complaints have to be taken seriously.

And the government is not ignoring these problems, but progress is much too slow for many people's liking.

The fact that Eni has confirmed that it is not moving to Iraqi Kurdistan, as ExxonMobil is expected to do, can not be seen as an endorsement of the ease of doing business in southern Iraq; if anything, the administration should be glad that it dodged a bullet.

Iraq is a complicated environment, and Upper Quartile and AAIB are the ideal partners to guide your business through the complexities of Iraqi life. For more information please contact Gavin Jones or Adrian Shaw.

The dispute between Iraq's central government and the Kurdistan Regional Government over oil contracts in northern Iraq has been dragging on for years, but it recent times we've seen developments that push the sides further apart rather than bringing them together.

While the short-term issue of payments for shipments from Iraqi Kurdistan appears to have been resolved, the old problem of recognition of oil-related contracts is causing increasing tensions; the absence of an oil law doesn't help.

If ExxonMobil really hands back the keys to West Qurna I and sets up shop openly in Kurdistan, it would send shock-waves through the industry. Essentially it would be a gamble that a more risky and speculative prospect in Kurdistan will be worth more in the long run than a relatively secure but low-margin business in the south.

Ladies and gentlemen, place your bets.

By Thomas W Donovan, attorney at the Iraq Law Alliance.

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

Foreign "experts" like to depict Iraq's oil industry as a cesspit of corruption, turmoil and factional politics. In fact, however, Iraq has made real progress, and is aiming for more. But it is true that serious legal, political and technical challenges must be met if the sector's ambitious plans are to become reality.

Remember that the events of the last decade, beginning with the US-UK invasion of March 2003, have presented Iraq with far more social, economic, military, legal, political and infrastructure challenges than any of its Opec neighbours have faced.

Getting oil production up to the current level of about 3 million barrels per day (bpd) is an accomplishment in itself. Baghdad says production is at a 20-year high; the US says Iraq has now surpassed Iran in daily production.

The Iraqi government plans to keep pumping, and is bringing in major international oil companies. The government has now held four petroleum licensing rounds: in the first three, private companies bid to take over certain producing oil and gasfields from the old state monopoly company; the fourth was for exploration rights in promising areas not yet producing.

ExxonMobil is in talks to sell its 60% stake in the massive West Qurna-1 oil field, while gearing up to start a controversial drilling program in Iraqi Kurdistan, the Wall Street Journal reports, citing what it described at "people familiar with the matter".

Exxon's 2010 deal with the Iraqi central government to improve production in the West Qurna-1 field was never expected to be lucrative under the best of circumstances, one source said. The company would receive $1.90 for each additional barrel of oil they pumped after refurbishing the already-producing field, barely be enough to cover costs.

The Guardian reports that Exxon has informed Iraq's Deputy Prime Minister for Energy Hussain al-Shahristani and the U.S. State Department of its intentions.

This comes as talks between Erbil and Baghdad aimed at resolving differences over oil rights appear to have stalled again after a brief period of progress.

Shell has a 15% stake in West Qurna-1, with the remaining 25% owned by the Iraqi state oil company; Shell reportedly declined to comment when asked whether it is interested in buying Exxon stake in West Qurna-1 field.

Exxon's exploratory drilling in Kurdistan could start as soon as early 2013. It has already ordered oil-well casing heads and is negotiating a contract with an oil-services firm, said another person familiar with its operations in the region.

(Sources: Wall Street Journal, The Guardian)

Russia's LUKoil said on Tuesday that Iraq has not asked it to replace Exxon Mobil at the West Qurna-1 oilfield.

Nefte Compass said last week that Iraq was considering replacing Exxon with either Russia's LUKoil and Gazprom Neft, but LUKoil Vice President Leonid Fedun (pictured) told Reuters:

"No one has offered us West Qurna-1 ... We respect Exxon and the Iraqi government a lot. But we are simply lacking the financial resources to take on such large projects at the moment."

LUKoil, Russia's second-largest crude producer, already holds a 75 percent stake in the adjoining West Qurna-2, after buying out junior partner Statoil in June.

Chief Executive Vagit Alekperov said LUKoil was in no rush to find a new partner.

"We have interested parties from the Gulf and from China," he told investors. "But we don't feel pressed to sell a share in the project."

Alekperov said 23 wells would be drilled at the oilfield by the end of 2013. LUKoil is targeting an internal rate of return of 15 percent versus earlier expectations of 13 to 15 percent.

(Source: Reuters)