Custom Search

The following article was published on Monday 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.

So far, conspiracy theorists alleging that American appetite for oil was the real factor behind the Iraq War – perhaps even in a plot intended to partition the country for the benefit of US oil interests – haven’t quite been able to fit their theory to the empirical realities. Until now, American companies have not been particularly prominent in terms of their involvement on the ground in “the new Iraq”. Also, generally speaking, most of the contracts of the IOCs signed with Baghdad come across as modest in terms of profit rates for the Western companies compared to what goes to Iraq.

Enter Exxon Mobil and its recent Kurdistan dealings. The story began in the shape of rumours last week but has now been confirmed by a sufficient number of sources that it can be treated as facts: Exxon has cut separate exploration deals with the Kurds, circumventing Baghdad and thereby potentially jeopardising its existing service contract with Baghdad for the supergiant West Qurna field near Basra. The move could also signify the entrance of “big oil” into Kurdistan after a period of “small oil” dominance (including, most recently, former BP chief Tony Hayward in his new role in Genel).

The bid comes at the most critical juncture imaginable. For the first time in the history of Iraq, the central government is threatened by federalism movements in both Sunni and Shiite areas, alongside the existing challenge from the established Kurdish region. Today saw further unprecedented moves in this direction in parliament where Usama al-Nujayfi, the speaker of the national assembly, organised an impromptu conference on federalism and decentralisation issues. The conference – attended by representatives of five Sunni-majority provinces and reportedly boycotted by the ten Shiite-majority ones – concluded with a statement that highlighted such broad issues as the constitutional right to form regions, the need to reform the provincial powers law of 2008 and even the question of the impartiality of the Iraqi judiciary.

Whether Prime Minister Nuri al-Maliki in this critical situation will bend to the pressure from Exxon Mobil and give up his policy of blacklisting companies that do separate deals with Kurdistan remains to be seen.

A consistent response would involve kicking Exxon out of its Qurna contract which is shared with Shell (which in turn has not concluded any deals with the Kurds). Maliki has so far been able to resist federalism initiatives from fellow Shiites in Basra and Wasit, and has recently indicated a possible judicial approach that could create delays for the latest Salahaddin autonomy bid. Maliki does not really enjoy the parliamentary backing required to act so boldly, but as long as his enemies are unable to sack him due to their own disunity there is plenty of room for manoeuvre for the prime minister regardless of the parliamentary situation.

If on the other hand Maliki does feel threatened by the growing number of unhappy oppositionists he will likely turn to deal-making with the Kurds in order to ensure his own survival. In that respect, bargains over oil may perhaps be an easier route than a sell-out on Kirkuk (which is certain to meet with opposition even in Shiite Islamist circles that are normally friendly to the Kurds). Taking a pragmatic approach to the latest Exxon deals in Kurdistan might be one aspect of such an approach.

The international dimensions of these developments are particularly hard to grasp. It seems remarkable that a company of Exxon’s stature should run such an incredible risk with West Qurna had there not been some kind of deal-making and assurances under the table. Could the move have been clarified with the Obama administration? Right now, it seems Washington cannot quite make up its mind as to whether to slap Maliki in the face or try to put a gloss on the whole situation. It is noteworthy that according to Kurdish sources, the deals with Exxon were signed on 18 October 2011 whereas 21 October was the date of Obama’s “total withdrawal” speech on Iraq. Would Washington really want to put all its eggs in basket of central-northern Iraqi energy when even the most optimistic scenarios for the Kurdish areas (including the projected Nabucco pipeline) dwindle by comparison with the south? The geopolitical risk of those fields falling under ever firmer Iranian control is certainly considerable.

The net effect of the Exxon Mobil dealings are easier to evaluate: They make Iraq look more fragmented, vulnerable and susceptible to foreign influences than for a long time.

The Kurdistan-Iraq Oil and Gas Conference in Erbil heard confirmation that the Kurdistan Regional Government has signed an oil exploration contract with ExxonMobil, the world's largest oil company.

Ashti Hawrami, the minister for natural resources, told the conference that the KRG had signed a contract with ExxonMobil and that the federal government was kept informed throughout the negotiations.

He said, "This will make a dynamic change in the region and will lead to mergers and acquisitions." He said that Kurdistan had initially signed contracts with "small and beautiful" companies and was now working with "the giant and magnificent".

In answer to questions from the audience, Dr Hawrami said the ExxonMobil contract was signed on October 18 and involves six exploration areas. "This agreement is good news not just for us but for all Iraq. This is also good news for the industry. It adds more value in terms of expertise and investment," he said.

Dr Hawrami was speaking at the two-day conference which attracted hundreds of industry executives from around the world, including representatives from major oil companies not currently working in the region.

The conference was opened by Prime Minister Barham Salih on Sunday and was attended by Kamal Kirkuki, the Speaker of the Kurdistan Parliament, Selahattin Cimen, Turkey's deputy energy minister, and Britain's ambassador to Iraq Michael Aron.

Following the confirmation that ExxonMobil will be exploring six blocks in Iraqi Kurdistan, oil major Chevron is said to be in talks with the Kurdish government to begin exploration activity in the region.

KRG’s natural resources minister Ashti Awrami revealed that his government was in talks with 3 major oil companies to begin exploration in the region which is said to hold 45 billion barrels of oil and 100 – 200 trillion cubic feet of natural gas.

According to the report from Forbes, Chevron and Italian major Eni may be in talks with the KRG.

The revelation from KRG prompted a strong response from the Iraqi government which questioned the legality of such contracts in the past. Deputy prime minister Hussain al-Sharistani has hinted that the Iraqi government may force Exxon to choose between its plans in Kurdistan and its expansion of the West Qurna super giant field.

(Source: Forbes)

Another leader of Genel Energy has stated his opinion that Norway's DNO is a possible takeover target.

"DNO is our natural partner so it makes a lot of sense if we can take them into Genel," Mehmet Sepil, CEO of Genel Enerji, told Reuters.

Genel Energy, formed by the combination of Vallares Plc and Turkey's Genel Enerji, has made no secret of its plans to make acquisitions with its $2.2 billion in cash.

But Sepel said on Sunday that the company is not in detailed talks with anyone as it completes its own merger, which is expected to be completed around 21st November.

Sepil said he would remain with the new company but would not be involved in the day-to-day management.

"We are interested in a few companies, (but there are) no detailed talks at this point", he added.  "I'm sure in the next few months you'll see a lot of announcements coming from us."

Tony Hayward said in late October he that was interested in buying DNO and its Kurdish oil licences.

DNO chief executive Helge Eide said last week that the company was ready to pursue its own acquisitions as it integrates the Gulf assets of Dubai-based RAK Petroleum. The company is producing 50,000 barrels per day of crude at its Tawke field in Iraq's northern Kurdish region and will boost output capacity to 100,000 bpd next year.

DNO's stock surged 21 percent on Friday on reports that Exxon Mobil had completed a deal with the Kurdistan Regional Government for six exploration blocs.

"The Exxon story was probably great news for everybody but not for us," Sepil said. "I really wished they had come six months later."

(Source: Reuters)

The fallout from the agreement between the Kurdistan Regional Government (KRG) and ExxonMobil to explore six blocks in Kurdistan continues to be felt.

According to a report on Friday by Radio Free Europe/Radio Liberty, the U.S. government-funded news outlet, Iraq’s central government said it had settled the oil dispute with the KRG with an agreement that would open the door to international oil companies operating in the Kurdish region without penalty from Iraq.

But a statement on Saturday from the media office of Hussain al-Shahristani, the country’s deputy prime minister for energy affairs, said “The Iraqi government will treat any company breaching its laws in the same way it has treated similar companies in the past. The ministry of oil has informed Exxon Mobil of this position.”

“Some media cited a story saying that Vice President for Energy Affairs Hussain al-Shahristani had approved that a U.S. company operating in southern Iraq explore oil in the Kurdistan province,” the ministry said. “We affirm that this story is not true altogether.”

The KRG's Natural Resources Minister, Ashti Hawrami, said on Sunday "It is a binding contract ... It was signed completely on the 18th of October 2011". It was the first official confirmation from the KRG. Exxon has yet to comment on the deal.

The British Government also entered the quagmire on Sunday when Michael Aron, British ambassador to Iraq, called on Iraq to "resolve its differences [with KRG] and reach an agreement over hydrocarbon laws and revenue sharing ... The British Government would like a climate where British companies can work in and exploit the opportunities, with the Iraqi government and the KRG, across the whole of Iraq ... The British embassy was imploring both sides to resolve this issue and I would support that request."

The Independent newspaper reports that Mr Aron spoke after Mowaffaki al-Rubaie, former national security adviser to Iraq and member of the Iraqi parliament, warned that the Exxon Mobil deal "will not help the delicate negotiation of hydrocarbon law in Baghdad. We believe the Federal government will challenge Exxon Mobil".

For further analysis from our expert blogger, Ahmed Mousa Jiyad, please click here.

(Sources: AKnews, The Independent, The Guardian, Bloomberg, BusinessWeek)

Share prices  in companies related to oil exploration in Kurdistan rallied on Monday, as stories circulated about a resolution of the dispute between Baghdad and Erbil on the recognition of oil contracts.

This came despite an escalation in tensions between the two administrations regarding these contracts, which was brought to a head with the announcement of a deal between KRG and ExxonMobil.

Nevertheless, Gulf Keystone (LSE: GKP) closed the day 8.3% higher at 192p, having been up as much as 13% earlier in the day, and put in a gain of 26% on Friday.

Sterling Energy (LSE: SEY) was up 4.8% on Friday's close, at 48.5p.

Petroceltic (LSE: PCI) also enjoyed strong gains, up 8.8% at 8.16p, following 12.3% gains on Friday.

Norwegian-based DNO closed up 2%, following a 21% jump on Friday.

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

The news of ExxonMobil’s venture by signing 6-blocks PSCs with KRG could have very serious ramifications as the move is rather puzzling, it occurred and became known at critical time, and consequently caught the Iraqi government off-guard.

The company has been negotiating with KRG, directly or through intermediaries, for many months leading to signing agreement(s) in October. International sources say the Iraqi government was notified on the matter, and the Ministry of Oil had issued three letters to the company stressing that, according to regulations of the central government, any company which signs deals with the KRG wouldn't be allowed to work in the center and south of the country, meaning ExxonMobil would risk its (with Shell) West Qurna 1 giant oilfield.

Also reliable source says, the six blocks were originally offered to Shell and ExxonMobil three each, but Shell declined the offer, and KRG gave ExxonMobil a 48 hours ultimatum before the deal was finally signed in London.

It is expected the Iraq council of Ministers meet urgently to discuss the matter and decide on the fate of the West Qurna 1 contract with ExxonMobil.

What motivated ExxonMobil to make this move despite the warning from the Ministry of Oil is a matter the company alone can answer, others could only speculate. But why a company that has the highest contract- in barrels-term, and has the leading position in a major water injection project would risk these two lucrative projects and, possibly any other future opportunities? Only time will tell!

The timing is also critical and unfavorable for the Iraqi government. American forces are, and would be fully, leaving the country by the end of the year. The government is obviously preoccupied with the implications and consequences of this withdrawal at least from security perspectives.

An adviser to the Resources Minister of the Kurdistan Regional Government (KRG) confirmed on Friday that ExxonMobil has signed agreements to explore for oil and gas in six blocks in Iraqi Kurdistan, according to Dow Jones.

This is big news, as the Baghdad government has previously excluded companies operating in the Kurdish region from oil contracts in the rest of the country; as recently as September Baghdad excluded Hess Corp from participation in the fourth energy licensing round because of its contracts with the KRG.

ExxonMobil is already producing around 370,000 barrels a day of oil from the West Qurna field, under a service contract with the Baghdad government.

According to Reuters, Iraq's government told ExxonMobil last month that any oil exploration contract it signed with the KRG would be illegal and could result in termination of its West Qurna contract, warning of "dire consequences".

(Sources: Reuters, Dow Jones, Financial Times)

2nd BASRA OIL & GAS

25- 28 November 2011

Basra International Fair Ground, Al Maqal Port / Basra, IRAQ

19 SPONSORS, 470 PARTICIPANT COMPANIES… THE FOREMOST OIL & GAS EVENT IN IRAQ!

2nd Basra Oil & Gas has exceeded all expectations and has proven it is going to be a much bigger success compared to the first edition. 19 Sponsors and 470 participant companies will welcome the high number of visitors expected. We invite you to participate in this biggest industry event of Iraq, along with local and international companies, global oil & gas giants and state companies from both Iraq and abroad, such as Shell, BP, ExxonMobil, Eni, Petro China, General Electric, Samsung, Siemens, Tenaris, South Oil Company, South Gas Company, Turkish Petroleum, Honeywell, Cameron, FMC Technologies, Mitsubishi and many more.

Largest in Iraq!

The 2nd edition of Basra Oil & Gas, taking place from 25-28 November 2011, is set to be the largest industry event to date in Iraq. It has already exceeded the record of the first event which hosted 218 exhibiting companies in 2010.

High Profile Conference

The conference will be held concurrently with the exhibition, with the theme "IRAQ ON TRACK IN CONTRIBUTING TO FUTURE WORLD ENERGY SUPPLY." As well as international and local industry professionals, officials from state companies and ministries will be joining this important summit. Conference will enable the Explorationists, Geoscientists and Engineers from the Oil and Gas Industry, Service and Manufacturing Companies, Finance, Universities and R & D institutions, to share their expertise, exchange ideas and experiences, update their knowledge and skills and discuss the latest progress and challenges facing the Petroleum Industry as well as, of course, networking and relational development.

Confirmed speakers briefing the conference delegates at the 2nd Basra Oil & Gas will be from; Ministry of Oil , South Oil Company, Qatar Petroleum, Novomet, Chimec, Endress Hauser, Mena Associates & Amereller Legal Consultants, Control Risks, Olive Group and Al Iraq Company for Safety and Fire Fighting Services.

Keynote speakers will be the senior level managers from Oilserv, Shell, Exxon Mobil, Turkish Petroleum Corporation and ENI.

To participate in the foremost oil & gas event of Iraq, kindly send all your enquiries to [email protected] .

Senior executives and industry experts gathered at the three day conference and seminar Iraq Mega Projects 2011 hosted by The CWC Group at the Ritz Carlton, Istanbul between the 18-20 October 2011. Focusing on the recent developments of Iraq’s oil and gas fields, water projects drilling activates, infrastructure growth and corporate social responsibility the event proved to be a great success.

H.E. Thamir Gadhban Chairman of the Advisory Commission to the Iraqi Prime Minister Iraqi Government, stated at the conference “Iraq is now producing 2.9 million barrels of crude oil a day and could reach approximately 3 million barrels a day by the end of October” also commenting Iraq’s output has increased mainly from three super giant producing oil fields, Rumaila, West Qurna Phae 1 and Zubair, which are being developed by consortiums led by BP PLC, Exxon Mobil and Eni SpA.

To improve infrastructure and develop the oil fields BP PLC, Exxon Mobil and Eni SpA will spend $100 billion across the three oil fields, $50 billion on upgrades to the West Qurna Phase 1 field and the remaining $50 billion on upgrades to the Rumaila and Zubair oil fieldsm which will support the consortiums target to produce 6.8 million barrels a day by 2017.

Proving to be one of the highlights of the event, project led roundtable discussions led by contract holders Statoil, ExxonMobil, Petronas, Sonangol, Eni and Lukoil gave delegates the opportunity to discuss key challenges and opportunities faced in the development of Iraq’s oil and gas fields.

With the conference room full until the end of the last session, delegates showed enthusiasm in discussing the challenges, solutions and future opportunities for Iraq’s oil and gas infrastructure.

Iraq Mega Projects 2011 industry support to date Includes: Caterpillar, Iratrac, Unatrac, Emerson, Lakeshore TolTest, Olive Group, ExxonMobil, Statoil, Total, Oxy, Techint, OIEC, ACT, Exterran, Unaoil Group and Petronas.

For further information visit: http://www.cwcimp.com/index.aspx