Wednesday, 15 February 2012

Iraq warns IOCs over Kurdish oil deals

Iraq's Deputy Prime Minister for Energy Hussain Shahristani has said that Total would face “full consequencies” if it signed oil deals with the semi-autonomous Kurdistan.

Shahristani told Reuters: “The position of the Iraqi government will be the same as with the other oil companies, that no company has a right to sign a contract without the approval of the central government of Iraq…Any such contract has no standing with the Iraqi government, and the companies have no right to work on the Iraqi territories and they bear the full consequences."

Shahristan's comments came after Iraq opened a new Gulf crude export outlet in the southern oil hub of Basra on Sunday 12th February, which is expected to increase Baghdad's exports by about 300,000 b/d once the crud begins to flow.

According to Reuters, the plan should raise exports from Iraq's southern oilfields to approximately 1.9 million b/d by March and bring Iraq's total shipments to 2.3 million b/d. After years of war and sanctions, Iraq has recently signed deals with a number of IOCs including, Shell, ExxonMobil and BP to develop its southern oilfields.

Speaking about ExxonMobil, Shahristani said that the US major would not be able to participate in Iraq's fourth energy bidding round because of its agreements with Kurdistan, which has its own regional government and military force.

He noted: “Exxon was informed about the Iraqi government position clearly and openly. They asked for some time, and we are waiting for their final answer to inform them of our final decision…But right now they are not qualified to participate in the fourth bidding round."

The friction between Baghdad and Kurdistan remains as both regions claim autonomy over their oilfields, however, Baghdad is adamant that the central government has control over the country's oil reserves.

On Friday 10th February, Total Chief Executive Christophe de Margerie said the company would not seek contracts in the Iraqi bidding round due to conditions being unattractive but added that it was considering Kurdistan deals.

When asked by Reuters to respond to Margerie's comments Shahristanti said: "If they don't find it attractive enough, they are most welcome to withdraw from it." He also said that as he understood Iran would not carry out a threat to close down the Strait of Hormuz because Iranian oil supplies also relied on the shipping lane and the closure would be detrimental to Tehran.

He explained: “My understanding is that the Iranians would not close the Strait because they don't benefit anything from its closure…They are exporting most of their oil through the Strait of Hormuz, of course it is not to their benefit."

Sources: Reuters, News Wires, WSJ

For more news and expert analysis about Iraq, please see Iraq Focus.

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