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By Padraig O'Hannelly.

Tensions between Iraqi Kurdistan and the central government in Baghdad have increased significantly in recent times, both politically and commercially.

On the political front, the "difference of opinion" about the sending of Iraqi troops to the border between Iraqi Kurdistan and Syria was eclipsed by reports that the Kurdistan Regional Government has been secretly buying weapons.

Commercially, we've seen two more major oil companies declare their hands, with both Chevron and Total taking stakes in Kurdistan in defiance of warnings from Baghdad. The Oil Ministry used some strong language in its condemnation of the Chevron deal, and is reportedly in the process of removing Total from the Halfaya field.

Attempts to put political pressure on ExxonMobil, the first of the majors to enter Kurdistan, also appear to have failed.

Taken together with the disappointing response to the fourth energy bidding round, these deals challenge any assumption that Baghdad can simply pull rank on Erbil when it comes to securing the involvement of top-tier oil companies; given a choice between poorly-paying service contracts in the South and potentially lucrative production sharing contracts in the North, it's increasingly clear which they prefer.

By John Lee.

An Iraqi oil ministry statement on Tuesday said that Chevron, the second largest U.S. energy company, will be barred from contracts in central and southern Iraq as a result of buying stakes in two oil-exploration blocks in Iraqi Kurdistan.

“Chevron is barred from any agreement or contract with the federal ministry of oil and its companies …unless it retreats from the contract it signed in Kurdistan region,” the oil ministry statement said.

Chevron purchased 80% stakes in the Sarta and Rovi blocks in Iraqi Kurdistan from India's Reliance Industries; Austria's OMV holds the remaining 20 percent.

Baghdad has already blacklisted companies that maintain deals with the Kurds, excluding them from working elsewhere in Iraq. Among those is New York-based Hess, which was barred last year from competing in the fourth energy auction. Exxon Mobil was also banned from the same auction.

(Sources: Reuters, Wall Street Journal, AKnews)

By John Lee.

Turkey has started importing the crude oil from the Kurdistan Region of Iraq, and will hold negotiations over direct sales to the natural gas.

The Turkish Energy Minister said in a press conference on Friday that "Turkey has started importing five to ten trucks of crude oil per day from Kurdistan, and the quantity will increase to between one hundred and two hundred per day", according to AIN.

The spokesperson of the government, Ali al-Dabbagh stated in a press statement on Wednesday that "The Council of Ministers regards the export of oil by the KRG to Turkey as illegal, and Turkey must not allow it because it is responsible for this issue."

AKnews quotes, Samira al-Moussawi, an MP from Hussein al-Shahristani's parliamentary group as saying, "the Kurdistan region, in cooperation with Exxon Mobil, is smuggling oil to foreign countries including Turkey and Iran without agreement with the government, and this is an encroachment on the constitution and the laws."

U.S.-based private intelligence consultancy Stratfor observed: "Ankara's approach of offering concessions and projects to both Baghdad and Erbil seems to be gaining ground ... Wednesday's announcement represents an important leap forward for Turkey's ambitions in Iraq and, if successful, will make Turkey the premier enabler of foreign investment and development plans for both northern and southern Iraq."

(Sources: AIN, AKnews, UPI, Reuters)

(Picture: Trucks queueing at the Iraq-Turkey border)

By John Lee.

Shares in Afren, the U.K.-based oil and gas company with operations in Iraqi Kurdistan, gave up some of their recent gains on Wednesday, but were still nearly 10% up on Monday's intra-day low on speculation of a takeover offer.

According to This is Money, rumours were rife that Italy's ENI, and Exxon Mobil of US, the world’s largest energy company, are both considering an acquisition of the firm. Either one could launch a bid in the region of £2.15bn cash or £2-plus a share, it speculated.

Malcolm Graham-Wood, of VSA Capital, says the company has a good mix of production and exploration, and offers exposure to some of the most exciting prospective areas in the world.

Currently trading at 113p, over the past year the shares have as low as 73p (October) and hit a high of 150p in April.

(Picture: Afren's Barda Rash operations)

Iraq's Deputy Prime Minister says ExxonMobil is still engaged with the West Qurna-1 oil-field in the south of the country.

At CWC‘s Iraq Petroleum 2012 conference in London last week, Dr Rowsch N Shaways told Padraig O’Hannelly for Iraq Business News :

"To my knowledge, Exxon is still operating in the South, with current contracts. I'm not the Minister for Oil and I'm not directly in charge of the sector, but as an Iraqi politician, my objective is that Iraq's oil is to serve all Iraqis.

"We have to increase  the revenue generated from oil, so that the whole Iraqi population can benefit ... We should give a chance to all companies to operate in Iraq, in particular to those companies that have the capacity and the know-how to operate in Iraq."

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Iraq Business News is delighted to bring you the latest Iraq Market Tracker report from Dunia Frontier Consultants. The market tracker highlights the activities and market performance of a basket of publicly traded firms who derive a significant percentage of their revenues from operations in Iraq, but are traded on foreign exchanges: a proxy Iraq play as much as practicable. It also identifies and analyzes the primary political and security events that occur in country that have market-moving implications.

Click here to access the report.

Companies Mentioned:

CNPC, DNO, Eni, Exxon, Genel Energy, Gulf Keystone, Heritage Oil, Lukoil, Rosneft, Shell, Statoil, Total, Weatherford

Action Calls:

• Reminder: Subscribe to the Market Tracker!: Today's is the last free Market Tracker! To subscribe, please click here and select your preferred subscription options.
• Rosneft rumored to be in talks with Exxon: Exxon reduces exposure as pressure ratchets up on Maliki.
• Eventful week for Iraq shows bifurcation of oil and gas industry: Both Erbil and Baghdad continue to make healthy progress as their oil development moves in different directions.

Headlines:

• Gorran objects to KRG budget: Reminder that Kurdish dissent exists and could affect effectiveness in face of Baghdad.
• Al Hal defects to Maliki on NC vote: NC is in effect dead, but Sadr will continue to milk it.

Calendar Events Discussed:

• June 24 - Parliament [finally] returns from 7 week break

Click here to access the report, or to select your preferred subscription option to receive the Iraq Market Tracker via email.

The following article was published by Reidar Visser, an historian of Iraq educated at the University of Oxford and currently based at the Norwegian Institute of International Affairs. It is reproduced here with the author’s permission. Any opinions expressed are those of the author, and do not necessarily reflect the views of Iraq Business News.

Amid continued threats about a forthcoming questioning of Prime Minister Nuri al-Maliki, allies of the Iraqi premier have embarked upon what seems to be a pre-emptive move: A formal request for a parliamentary debate on the performance of parliament speaker Usama al-Nujayfi, with a focus on alleged “constitutional infractions”.

To some extent, the Maliki-Nujayfi struggle has the characteristics of a tit for tat escalation between Maliki’s Shia Islamist State of Law bloc and Nujayfi’s secular and Sunni-backed Iraqiyya. True, this is not the first time there has been tension between the two. But it was mainly after the issue of a Maliki no confidence vote came on the agenda earlier this spring that the idea of sacking Nujayfi as parliament speaker became a prominent issue.

One aspect to keep in mind regarding a potential attempt to oust Nujayfi is that the modalities for getting rid of the parliament speaker are not covered in the Iraqi constitution. Instead, the process is governed by the law on the replacement of deputies. The relevant clause was adopted in a revision of that law in 2007 and the relevant paragraph says parliament can sack its speaker with an absolute majority based on a reasoned request from a third of its members.

In today’s Iraqi parliament, those numerical requirements translate into 163 MPs for sacking the speaker (same as for sacking the PM) and 109 for calling the vote. It is noteworthy that there is in some ways thus a stricter requirement for introducing a no confidence vote against the speaker than against the PM (the latter can be called by 65 members following questioning initiated by 25 MPs). It is noteworthy also that the request from State of Law that has been filed is not an outright call for a vote on his ouster. Rather they are talking about a debate “preparatory to his sacking”. No more than 25 signatures are required for this (61-7-b of the constitution).

In May, Turkey and Iraqi Kurdistan announced they would build pipelines taking oil and gas from Iraq into Turkey, then possibly Europe. But according to this article from NIQASH behind the energy dream, lurks a nightmare of militant Kurdish independence fighters and the spectres of energy giants, Iran and Russia.

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

To some it is a dream come true, others think it’s a nightmare that will never see the light of day. The May 2012 announcement by Ashti Hawrami, the Minister of Natural Resources in the semi-autonomous state of Iraqi Kurdistan that they would build new oil and gas pipelines to Turkey shook the Iraqi government in Baghdad.

The first phase of pipeline construction is supposed to be completed by October this year and the second phase is due to be finished by August 2013. Another pipeline is to be built by 2014.

Baghdad reacted unhappily to this announcement, saying – as they had done with other oil deals – that the Kurds were working outside of the national remit. National Deputy Prime Minister for Energy, Hussein al-Shahristani, was dismissive of the pipelines and local media were also rather negative about it.

Yet it appears that Baghdad feels that that the northern state of Iraqi Kurdistan is slipping out of its control. For the last five years Baghdad has been trying to reign in the Kurdish government, especially when it comes to oil and gas.

Shahristani has blacklisted oil companies operating in Iraqi Kurdistan and even ensured that, during the recent lacklustre fourth round of bidding to do oil work in Iraq, there was a new clause preventing any oil companies from going into Iraqi Kurdistan without Baghdad’s permission, as oil major Exxon Mobil did in November 2011.

The following article was published by Reidar Visser, an historian of Iraq educated at the University of Oxford and currently based at the Norwegian Institute of International Affairs. It is reproduced here with the author’s permission. Any opinions expressed are those of the author, and do not necessarily reflect the views of Iraq Business News.

In an interesting move, Prime Minister Nuri al-Maliki has asked President Barack Obama to intervene to stop Exxon Mobil activities in areas of Iraq controlled by the autonomous Kurdistan Regional Government.

Few details of the correspondence are known. The White House has officially acknowledged receipt of the letter from Maliki but has made no elaborate comment except saying it will reply in due course. A few comments on the letter by a Maliki adviser have been published by Reuters.

There is one interesting snippet of information in the reports that have emerged so far: Maliki is evoking Iraq’s “political stability” as an argument against Exxon’s operations in Kurdistan. As is well known, the conflict between Baghdad and the Kurds on oil concerns above all the right to sign deal with foreign companies generally. Additionally, some of the Exxon deals with the Kurds affect areas that are not only disputed between the KRG and Baghdad but even include territories that may well revert to the central government in a final border settlement.

The United States already has a series of executive orders in force relating to the stability of Iraq, though most of them target support for terrorism more specifically. Given Maliki’s choice of language, though, it is not inconceivable that he has in mind a logic similar to that embodied in a recent presidential executive order against US citizens threatening the stability of Yemen. That order contains deliberately vague language and could in theory apply to everything from Al-Qaeda to Aden separatism.

Iraq gave a veiled warning to France's Total on Wednesday not to make deals with the KRG without the approval of central government in Baghdad, reports Reuters.

Kurdistan said on Tuesday it expects more oil majors to follow Exxon in striking deals in the region; Total has already said that it was interested.

Iraqi Deputy Prime Minister for Energy Hussain al-Shahristani gave his warning during discussions over oil exports and production with French Ambassador Denys Gauer, a statement from Shahristani's office said.

"(Shahristani) warned French companies operating in the oil sector in Iraq against signing contracts with non-Iraqi government sides or local governments," it said.

He noted "Iraq's desire to build advanced relations with France, especially in the field of energy and major strategic industries".

Norway's Statoil is also looking closely at KRG exploration deals, industry sources have said.

(Source: Reuters)