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Officials in Basra are reportedly trying to cancel a $17 billion Shell gas deal because they want a bigger say, highlighting the pressure on central government to ease its control over the provinces.

According to the report from Reuters, the province is increasingly restless with the slow pace of development and wants more control over its natural resources and revenues.

Demands for more provincial power have simmered for years in Iraq, split by ethnic, sectarian and tribal tensions, but the Basra push and an autonomy drive from Salahuddin [Salahadin, Salah ad Din] province threaten to stir tensions as the last U.S. troops withdraw.

The contract with Shell and Mitsubishi to capture flared gas in three southern Iraqi oilfields was signed on Nov. 24 despite objections from the Basra local council that it was not included in talks or the deal's signing.

Officials from the Basra Provincial Council filed a lawsuit against the Iraqi Oil Ministry on Nov. 25 demanding the cancellation of the gas agreement.

"In principle, we don't have any problem with developing the gas but when the contract is signed, there has to be an article that shows the provincial council has agreed ... Unfortunately, we did not know anything about this contract," said Sabah al-Bazouni, head of the Basra Provincial Council.

"Basra is the most suitable province to become an autonomous region."

Regional autonomy would give the province more power over finances, administration and laws, and an upper hand in supervising public property, which could loosen Baghdad's grip on the oil and gas sector.

The legal case is unlikely to deter Shell and delay the project, but it raises concerns about future disputes over oil and gas rights in Iraq, which is struggling to rebuild after years of violence just as Washington prepares for a full troop withdrawal by the end of December.

ExxonMobil's Chief Executive, Rex Tillerson (pictured), refused on Tuesday to answer questions about the company's deal with the Kurdish Regional Government (KRG).

When asked at a World Petroleum Congress in Qatar if he thought the contracts would hold up under Iraqi law, Tillerson said,  "I'm not in a position to comment on that".

At a press conference after the panel, Tillerson was again asked about the ramifications of the Kurdish contracts, and again declined to answer.

Last month, the U.S. State Department said it warned Exxon that any deals it signs with the Kurdish government may be annulled by Baghdad.

(Source: CNN)

Iraq is reported to be in talks with the United States about the exploration deals signed by ExxonMobil in Iraqi Kurdistan without Baghdad's approval, according to a report from Reuters.

Deputy Prime Minister for Energy Affairs Hussain Al Shahristani (pictured) said that Iraq was considering several options, not sanctions, over the deal and there was no deadline to take a decision against the company.

“After this (deal) was announced, yes there have been talks with the American government ... It is not a matter of mediation as much as it is a matter that concerns both governments,” he said in an interview.

“Now we have several options. The Iraqi government is studying them carefully ... there is no deadline, these are grave decisions that need time ... the company is studying its options and the Iraqi party is studying its options.”

He said any decision will be discussed with ExxonMobil first before a public announcement.

The US State Department has said it told ExxonMobil, and all major US oil companies looking to work in Iraq, there were significant risks to signing deals with the KRG before Iraq passed a national oil law aimed at resolving ongoing territorial and oil disputes.

Shahristani rejected earlier comments by Kurdish President Masoud Barzani in which he said Iraq’s prime minister, Nouri Al Maliki, was told of the ExxonMobil deal prior to its signing and had no objection.

“There has been no approval by the prime minister over any contract that was not presented to the cabinet,” he said.

ExxonMobil has not commented on the agreement and Iraqi oil officials say the company has not responded to their requests for an explanation.

Shahristani reiterated that the Iraqi Oil Ministry still had still not received any response from ExxonMobil.

(Source: Reuters)

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.

Perhaps one of the most interesting dimensions to the recent surge in federalism interest in Iraq’s Sunni-majority areas are those Sunnis that still don’t like the idea of federalism.

We have been in a similar situation before, with the Shiites. Back in 2005, when SCIRI suddenly declared its interest in a big Shiite region and the Western mainstream media promptly announced a general pro-federal tendency among Iraqi Shiites, it was internal Shiite opponents of federalism that ultimately torpedoed the whole project. Back then, at least to some extent, it seemed that popular resistance against sectarian federalism had prevailed.

Since Iraqi Sunnis began discussing federalism in earnest in late 2010, there have been three distinctive rounds of reactions.

Firstly, in the autumn of 2010 the provincial council in Anbar adopted a stance on the development of the Akkaz gas field that in practice amounted to federalism – and at least some local politicians openly advocated federalism. At the time, however, there were plenty of prominent, dissenting voices within Anbar itself.

Second, when parliament speaker Usama al-Nujayfi seemed to embrace something tantamount to Sunni sectarian separatism in late June 2011, there was also no lack of internal critics. Leading politicians from both Mosul (Nujayfi’s hometown) and the Iraqiyya coalition (Nujayfi’s political party) criticised the move.

Thirdly, there has been a separate wave of reactions to the latest bid by the governorate council in Salahaddin to request a federal referendum.

In the case of Salahaddin, perhaps the most prominent feature is that it has been somewhat difficult to identity leading Sunni local politicians opposing the bid. Vocal opposition has mostly taken the form of threats about sub-governorate separatism, which in turn has a (Shiite-minority) sectarian dimension. One of the few publicised signs of local opposition was a meeting between the Shiite premier, Nuri al-Maliki, and a number of unspecified tribal shaykhs of the governorate. For what we know, they may well have been Shiite Dujaylis.

Washington supports Baghdad's position regarding ExxonMobil's oil contracts with the Kurdistan Regional Government, according to reports from AKnews.

Mahmoud Othman, a Representative from the Kurdish Blocs Coalition in the Iraqi Council of Representatives, told AKnews the measures the Iraqi government has taken towards Exxon are political and not economic. He said Baghdad believes this company is important, and must choose whether to work with Kurdistan region or Baghdad.

"The U.S. position is bad towards Kurdistan...Preventing Exxon Mobil Corp. from operating in the region will make losses for Iraqis in general, including the people of Kurdistan, because the revenues of the extracted oil from Kurdistan goes to the treasury of the federal government."

Javier Blas, commodities correspondent for the Financial Times, said Exxon's move north into Kurdistan flew in the face of conventional wisdom that "the U.S. interests of 'Big Oil' and Washington go hand-in-hand". The U.S. state department were caught unawares by the corporation's northern adventure that was taken it would seem contrary to strong advise from the U.S. government.

The Iraqi Oil Ministry said last week that it will prevent Exxon from participating in the fourth licensing round if it decided to implement the six contracts concluded with the KRG.

(Source: AKnews)

Russian news agency RBC Daily reports that Lukoil, Russia’s second-largest oil producer, is looking to expand its business in Iraq through buying part of ExxonMobil's 60% stake in the West Qurna 1 field.

If the deal goes ahead Lukoil would hold 37.5% of the business. It is already in partnership with Norway's Statoil in the development of the West Qurna-2 oil field.

Vice CEO Leonid Fedun says Lukoil is interested in developing West Qurna-1.

The report quotes Alexey Kokin, analyst in Uralsib Capital, as saying “ExxonMobil is probably giving up the project, because its economics are not clear yet. It requires $15-20 billion to be invested in the next 20 years.”

Anglo-Dutch Shell is reportedly going to buy the rest of ExxonMobils’s share. The purchase would increase Shell’s share from 15 to 37,5%. The Iraqi state North Oil Company holds 25% of the project.

(Source: RBC Daily)

The furore over the contract signed by US oil giant Exxon with Iraqi Kurdistan is another sign that Iraq urgently needs a new oil and gas law. As this primer from Niqash explains, the lack of this law could well be a sign that the dream of united Iraq is over.

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

It’s been years in the making and the latest row about Iraq’s much-debated, much-delayed and mired-in-controversy national oil and gas law only indicates once again that issues around the legislation should have been resolved by now. The resolution of issues around the oil and gas law, which has never been passed in parliament, is essential to not only Iraq’s future but also to the stability of the region and it is way overdue.

The International Energy Agency forecast that Iraq would be the single most important source of new oil production between now and 2035, making the development of the country’s energy industry critical to international oil markets.

The latest drama focuses on the tensions between the federal government in Baghdad and the semi-autonomous state of Iraqi Kurdistan. In mid-October American oil giant ExxonMobil signed a deal with the government of the semi-autonomous region of Iraqi Kurdistan, which is using a form of oil and gas law that they formulated themsleves and which has not been approved by Iraq’s federal authorities, who are still using an older version. The contract signed by Exxon, which has been described as a “landmark deal” authorizes the firm to develop oil and gas in six blocks in the northern region. In doing so, ExxonMobil became the first major oil company to sign such a deal.

This was a huge public relations coup for Iraqi Kurdistan and for the policy makers in its capital, Erbil. It is certain to have an effect when Iraqi Kurdistan starts negotiations with Baghdad again on oil policy and oil legislation. As the Financial Times wrote last week “conventional wisdom says that the interests of US “Big Oil” and Washington go hand-in-hand. Thus, many see ExxonMobil, the largest US oil company, as an extension of the US State Department”. And some analysts believe the deal must have been OK-ed by the US State Department in an attempt to undermine the current Iraqi government, led by Prime Minister Nouri al-Maliki, after acrimonious talks about the nature of the upcoming US troop withdrawal. It seemed very unlikely that Exxon could have acted without being given the green light by Washington.

The President of Iraqi Kurdistan said on Wednesday that the region will go ahead with its exploration deal with U.S. oil major Exxon Mobil despite objections from Baghdad.

According to Reuters, Masoud Barzani (pictured) said Iraqi Prime Minister Nuri al-Maliki was told of the deal prior to its signing and had no objection, and called Baghdad's opposition unconstitutional.

"The contract is not unconstitutional. Yes, we have signed with Exxon Mobil according to the constitution ... the objection that we heard from some officials is what is unconstitutional," he told the news agency in an interview.

"We are committed to the deal and we will execute it without caring about what some officials in Baghdad say, which is against the constitution."

Exxon has not commented publicly on the agreement and Iraqi oil officials say the company has not responded to their requests for an explanation.

Despite the silence from Exxon, the U.S. State Department commented on the deal, saying it hoped Iraq and Exxon could resolve the dispute in a way that would not undercut the future development of Iraqi oil resources.

Barzani said the Exxon deal would benefit all of Iraq, not just the Kurdish region. He said he was surprised at Baghdad's recent warning against the deal.

"It is strange really, and has no meaning. For us, it doesn't mean anything. At the first step, I sent a message to the prime minister and informed him of all the details. The answer I got back was that there was no objection... Before the signing, yes."

"The oil policy in Iraq is a failed policy, I say it clearly. Ask the Iraqi people where are the oil refineries? ... How many hours of electricity are available for the Iraqi citizen in the center and south? And Iraq lives on a sea of oil," he said.

"If it is not a failed policy, then what is the reason?" he asked.

 (Source: Reuters)

By Tavish Scott, Member of the Scottish Parliament.

This article was originally published by The Scotsman, and is re-published 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.

A familiar face walked across the hotel lobby. Former BP boss Tony Hayward was deep in conversation as Erbil’s Rotana Hotel hosted Kurdistan’s first international oil and gas conference.

The capital of the northern semi-autonomous region of Iraq was buzzing with activity. Kurdistan is the new Saudi Arabia with the fourth-largest oil reserves on the planet and Erbil could be like Aberdeen in the 1970s, albeit without the sea and the harbour and with sand storms replacing easterly wind and sea harr.

The Erbil conference was party to a massive exploration deal signed between the American giant Exxon Mobil and the Kurdistan regional government. But the Baghdad federal government is not happy as they would rather control all the oil and gas developments across Iraq. The Kurds are safe, attractive to do business with and do not want to be held back by the stultifying bureaucracy and delay of Baghdad’s green zone.

Erbil and wider Kurdistan have been mercifully free of kidnappings, road-side bombs and killings since 2007. It feels safe to walk and drive around despite the obvious security, bag checks and police who are present at all major buildings. Drilling for oil in Kurdistan is therefore easier than across the regional border so Exxon Mobil will be followed by other multi-national oil and gas exploration companies. UK interest is considerable, with £3 billion of investment in the past six months alone. Aberdeen headquartered Wood Group have a presence and other export-orientated Scottish service companies will assuredly follow.

I visited the Kurdistan parliament, met the Speaker and discussed where the industry would take politics. The devolved government’s budget has grown from $100 million to $11bn in nine years. Oil and gas revenues operate under a precise formula laid down in the federal constitution and will add a further $2bn to the Kurdistan budget in the next year.

Iraq's oil minister said on Sunday that Iraq will send ExxonMobil a further letter demanding an explanation of its contract with the Kurdistan Regional Government (KRG) after receiving no response so far from the U.S. oil group, according to a report from Reuters.

"So far we have sent Exxon three letters and tomorrow we will send them another confirmation letter seeking their response," Oil Minister Abdul-Kareem Luaibi [Elaibi] said. "We have not decided anything yet. We are waiting for their response."

The outcome of the Exxon move is likely to influence how other companies carry out oil investment in OPEC-member Iraq, but it could also pressure Prime Minister Nuri al-Maliki as he faces demands from other regions for more autonomy.

Iraqi officials have said the Kurdistan deal could jeopardize Exxon's huge West Qurna One oilfield in the south. The U.S. explorer is also leading a multi-billion-dollar water injection project seen as key to southern oilfield production.

(Source: Reuters)