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The Financial Times has interviewed the Natural Resources Minister of the Kurdistan Regional Government (KRG), Dr Ashti Hawrami, about the future direction of the region's oil industry.

Please click here to see the full video.

Dr Hussain al-Sharistani, Iraq’s deputy prime minister responsible for energy, told reporters in London that Baghdad is considering its action against ExxonMobil for "breaching the law" by entering into an exploration agreement with the Kurdistan Regional Government (KRG):

"ExxonMobil has written to the Iraqi Government about this, and they have received the response from the Ministry of Oil and from the Prime Minister's office that contracts will not be recognised unless they are approved by the Iraqi Govenment, and that their contract in the South at West Qurna 1 obliges them to respect all Iraqi rules and regulations, and in this particular  case there is a breach of the law. The Iraqi Government is considering actions, and it will inform the company before it makes any public announcement."

"The position of the U.S. government has been that they have been unaware of it and if they had been asked, they would have advised [Exxon] to get approval of the Iraqi government before going ahead."

CNN's Arwa Damon brings this report from Kurdistan on the continuing struggle between the Kurdistan Regional Government (KRG) and Baghdad's Ministry for Oil over the right to grant oil contracts in the Kurdish region.

(Source: CNN)

According to Dow Jones, the Iraqi oil ministry could ask Shell to develop Iraq's supergiant West Qurna Phase 1 oil field in southern Iraq, if the government decides to terminate ExxonMobil's contract after it signed a deal to explore for oil in Iraqi Kurdistan.

"We have many options," said Abdul Mahdy al-Ameedi, head of the ministry's petroleum contracts and licensing directorate, when asked what the ministry would do if the West Qurna 1 oil field contract with ExxonMobil is cancelled.

"It is possible that Shell, or any other company, can replace ExxonMobil in West Qurna 1 field," he told Dow Jones Newswires in an exclusive interview. "The partner of ExxonMobil in West Qurna 1 is Shell, and Shell is a giant ... company and it is well aware of and taking part in all operations and activities in the field."

Shell reportedly pulled out of talks with the Kurdistan Regional Government last week following Baghdad's reaction to the Exxon deal.

Exxon Mobil Iraq Limited is the lead contractor at West Qurna Phase 1, with a 60% stake, while Shell has 15% and the remaining 25% belongs to the Iraqi state company.

Iraq's Oil Minister Adbul-Kareem Luaibi [Elaibi] said on Monday that both he and Prime Minister Nouri al-Maliki have written to Exxon Mobil and are awaiting a reply. He did not state the content of the letters, according to Reuters.

"Taking a decision to terminate West Qurna 1 contract is easy and the (oil) minister can take such a decision tomorrow, but we don't want to rush," Ameedi said. "We want first to make our position very clear and based on legal and sound basis despite the terms of the contract consolidating our position."

(Source: Dow Jones, Reuters)

Thirty-two international companies, including oil majors, have so far bought data packs for Iraq's 4th energy bidding round, according to Dow Jones.

The Iraqi oil ministry has qualified 46 international companies to take part in the bid round, scheduled for March 7, in which 12 exploration blocks will be auctioned.

The purchase of the data packages by these companies mean they are interested in taking part in the bidding round, Abdul Mahdy al-Ameedi, head of the ministry's Petroleum Contracts and Licensing Directorate, told Dow Jones Newswires in an interview in Baghdad.

Meanwhile, a two-day workshop in Amman, Jordan, for participating companies has been postponed from 5th December to 14th December, because of the Muslim Ashora holidays.

Among the companies buying documents so far are:

• Royal Dutch Shell PLC (RDSA),
• Exxon Mobil Corp. (XOM),
• BP PLC (BP),
• Eni SpA (ENI.MI),
• Total SA (TOT),
• Occidental Petroleum Corp. (OXY),
• Chevron Corp. (CVX),
• Lukoil Holding (LKOH.RS),
• Statoil,
• INPEX Corp. (IPBXHY),
• JX Nippon Oil and Gas Exploration or Corp., or JX-NOEX,
• Mitsubishi Corp. (8058.TO),
• Sumitomo Corporation, and
• Turkey's TPAO.

(Source: Dow Jones)

By Gavin Jones, Director of Iraq Business News, and Partner at consultancy firm Upper Quartile. This article was originally published on the Emerging Economics blog. Any opinions expressed are those of the author, and do not necessarily reflect the views of Iraq Business News.

Last week hundreds of people were arrested all over Iraq in an operation launched by the security forces against members of the Ba’ath party. Fair enough – it is a banned Party. However the authorities have used the membership list of the old party to find the people worth arresting, and claimed that the Party had revived its old structure.

The crackdown came a few days after Barack Obama announced that U. S. forces will pull out from Iraq by the end of 2011 and the sweep was one of the biggest of its kind in post—war Iraq. Iraqi officials introduced it as a pre-emptive strike against a sneaky plan by the pesky Ba’athists to overthrow the government. However this has not rung true and has just heightened tension throughout the Government. It was reported that Prime Minister Nouri al-Maliki had a verbal encounter with one of his Deputy Prime Ministers — Saleh al-Mutlaq — over the issue during a cabinet session. He needs to be careful as he is losing the trust of Deputy Prime Ministers more quickly than he can replace them.

For months the Iraqi parties debated whether they should ask U.S. forces to stay or not. The Kurds were for the extension and Shia cleric Moqtada al-Sadr was against – with the rest of Iraq’s leaders looking for political advantage before choosing sides.

The Financial Times reports on Thursday that Shell has pulled out of oil-development talks with the Kurdistan Regional Government (KRG) in an effort to protect lucrative investments in southern Iraq,.

The newspaper cited people familiar with the discussions as saying Baghdad is seeking to impose a de facto ban on companies operating in Kurdistan.

Following Baghdad's threat to cancel an existing oil field contract with ExxonMobil, Shell's move is considered precautionary, in order to protect its $17 billion natural gas deal that has just been approved by Iraq's cabinet.

"Baghdad's real power lies in denying future contracts and Shell still had something else on the table. They still had not signed the southern gas field deal," said one person familiar with the talks, cited in the article.

(Sources: Financial Times, Reuters)

In the continuing row over ExxonMobil's contract with the Kurdistan Regional Government, Baghdad has called the deal a violation of the law.

Reuters reports that Iraq's government said it would move to end a major contract with ExxonMobil, apparently referring to the company's multi-billion dollar contract with Iraq's oil ministry to develop the 8.7 billion barrel West Qurna 1 oilfield near Basra.

According to BusinessWeek, Baghdad hasn’t agreed to recognise the validity of drilling contracts in the Kurdish region, and the media office of Hussain al-Shahristani, the deputy prime minister for energy affairs, said Iraq will take measures against oil companies that break the country’s laws in the same way as it did in the past.

Exxon's agreement in Kurdistan and Baghdad's response have set up a power struggle between the Iraqi central government and multinational oil companies over the potential resources in the northern Kurdish region.

"Exxon has violated the ministry directions and instructions concerning the companies working in Kurdistan," said Abdul-Mahdy al-Ameedi, director of the oil ministry's contracts and licensing directorate.

"It's a violation of the contract and the law. As a consequence the oil ministry will take steps to end the contract. But this operation will need arrangements," he said without giving further details.

Exxon has so far not made any statement on the Kurdistan deal, and reportedly has not responded to the oil ministry.

Al-Ameedi said the Kurdish government had also been talking to U.S. oil company Chevron and Italian operator Eni. "We know that there is communication between them. There are talks," he said.

Chevron has said it continues to be interested in pursuing opportunities in Iraq but that it will not discuss specifics.

(Sources: Reuters, BusinessWeek)

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.

More details continue to emerge about the recent deals cut by Exxon Mobil with the Kurdistan Regional Government.

A key point in this respect is newly-emerged information that at least two of the six exploration blocks are in so-called “disputed territories” that are formally part of the Nineveh governorate but since 2003 have been administered by the Kurds who occupied these areas at the beginning of the war. This includes both the Qush and Bashiqa blocks.

In itself, this move by international oil companies into “disputed territory” is not entirely unprecedented in Iraq. Other companies including Hunt Oil and Gulf Keystone have previously concluded deals for blocks in disputed territory in Nineveh.

Once again, it is to some extent of course Exxon’s stature as a “Big Oil” company – and over above that as “American Big Oil” – that is particularly significant as far as the new disputed-territory dimension is concerned. It is noteworthy in this respect that previous attempts by the central government in Baghdad to auction off service contracts in disputed territories in Kirkuk failed, both in the first and second licensing rounds in 2009.

But there is a particular dimension to the Exxon contract for Bashiqa. It is commonly assumed that pro-Kurdish areas of the Nineveh governorate like Shaykhan and even Tall Kayf (where Qush is situated) may eventually gravitate towards the Kurdistan Regional Government when final status negotiations get going – to some extent as the result of pro-Kurdish feeling among Yazidis and Christian minorities there. However, in Bashiqa the situation is far from clear. A good study on the disputed territories by Sean Kane of USIP uses elections data at the district level to highlight Bashiqa as an area of Nineveh where Kurdish claims are not particularly popular among the local electorate.

The past week has seen two of the biggest oil stories in recent times in Iraq -- the approval by the Iraqi cabinet of the $17 billion project with Shell and Mitsubishi to capture gas from Iraq's main southern oilfields, and the confirmation that the KRG has signed an exploration agreement with the giant ExxonMobil.

The Shell contract has been very broadly welcomed, and it brings us closer to the day when Iraqi homes and businesses will have a reliable supply of electricity, powered by the gas that is currently flared off into the atmosphere.

Exxon's project, on the other hand, is more politically sensitive, and the full implications of it remain to seen.

But it is very clear that significant deals such as these in the energy sector will be required to push Iraq forward towards greater prosperity and stability. And as the UK's Ambassador Michael Aron said this week:

"A combination of stability, economic development and the creation of a competitive private sector offer huge opportunities for international and Iraqi business. And it puts Iraq right back at the centre of the global economy it left 20 years ago ...

"Ultimately, business will go where conditions are best."

Few would argue with that.

Will your business be part of the evolving Iraqi success story? If so, Upper Quartile and AAIB can help you. For more information please contact Gavin Jones or Adrian Shaw.