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The Iraqi Oil Ministry said on Saturday that it will prevent ExxonMobil from participating in the fourth oil licensing round if it does not cancel its contracts with the Kurdistan Regional Government, according to AKnews.

Abdul Mahdi al-Amidi, Director General of the Contracts and Licenses Department, said that Exxon Mobil violated the working laws of the Oil Ministry when it contracted with the KRG.

"The Ministry is waiting for an the official response from the company before it will be completely prevented from working in Iraqi oil fields," Amidi said.

According to the report, Deputy Prime Minister for Energy Hussein al-Shahristani (pictured) gave Exxon Mobil the choice either to work in the West Qurna field or the fields of Kurdistan, thus threatening to cancel existing contracts with the U.S. supermajor.

In the past Baghdad has prevented companies operating in the Kurdistan Region from participating in licensing rounds to develop Iraqi oil fields.

Other supergiant oil companies working in southern Iraq, like BP and Royal Dutch Shell, have held off from moving into Kurdistan Region for fear of antagonizing the Iraqi government.

Meanwhile, Barham Saleh, the prime minister of the KRG insisted that the deal was constitutional.

"The contract that we signed with ExxonMobil is a complete and constitutional contract, and is not against the constitution ... We have different points of view with the officials in Baghdad on a number of issues, but it does not mean that we are acting against the Iraqi constitution."

"If they think that we will abandon our constitutional right to deal with our natural resources, they will be wrong", he added.

(Source: AKnews, AFP)

The ExxonMobil controversy has dominated the business headlines in Iraq over the past week, and while it is very significant and politically sensitive situation, we should not allow it to distract us from the big picture -- the accelerating progress in development of the country.

Three quotes from this week's 'Iraq: Untapped Opportunities' conference in London, and from the newly-launched 'The New Iraq: 2012 Discovering Business' guide, perhaps sum up the situation best:

Dr. Sami Al-Araji, Chairman of the National Investment Commission:

"Our Five Year National Development Plan for 2010-2014 targets economic growth of 9.4% per year, with projects worth up to US$186 billion ... the sky really is the limit for investors."

Philip Kennedy, Managing Director of Eschmann:

 "If anyone is reluctant to enter the Iraqi market, for us it has been a wonderful transformation and I'd encourage companies to take up the challenge."

Robin Ord-Smith, UK Trade and Investment’s (UKTI) Iraq Director:

"There are excellent, excellent opportunities ... but the window is closing."

Can we be any clearer about it?

If you're considering taking that step into the Iraqi market, Upper Quartile and AAIB are the perfect team to help you manage the risks and grasp the opportunities. For more information please contact Gavin Jones or Adrian Shaw.

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)