U.S. energy giant Exxon Mobil Corp. (XOM) will be barred from Iraq's fourth oil-and-gas licensing auction, scheduled for May, because of the deals it struck with the country's semi-autonomous Kurdistan region, a spokesman for Iraq's Deputy Prime Minster for Energy Hussein al-Shahristani said Monday.
U.S.
energy giant Exxon Mobil Corp. (XOM) will be barred from
Iraq
's
fourth oil-and-gas licensing auction, scheduled for May, because of the deals
it struck with the country's semi-autonomous
Kurdistan
region, a spokesman for
Iraq
's
Deputy Prime Minster for Energy Hussein al-Shahristani said Monday.
The move comes as
Iraq
's
central government struggles to assert its authority over energy deals struck
within its borders amid a continued lack of legislation for the sector. The
Iraqi government considers as invalid any deals signed with the Kurdistan
Regional Government, or KRG, which in turn states that all and any deals it has
signed comply with the country's new constitution.
"The Iraqi government has decided that Exxon won't be allowed to
participate in the next oil and gas bidding round," spokesman Faisal
Abdullah told Dow Jones Newswires.
Iraq
is
planning to auction 12 promising exploration blocks, seven of which are
believed to contain natural gas, and five thought to contain crude. The new bid
round, expected to add some 10 billion barrels of crude oil and some 29
trillion cubic feet of gas to Iraq's reserves, has already been delayed twice
amid arguments on whether the contracts offered should be of the
production-sharing type wanted by the explorers or the fixed-fee service
contracts wanted by the government.
For the next licensing auction,
Baghdad
has
refused to offer industry-standard production sharing contracts, where the oil
company owns a portion of the oil in the ground and can profit from its sale. It
is instead insisting on service contracts that pay companies a fixed fee for
the amount of oil they produce.
The fixed-fee service contracts have worked for the redevelopment of existing
oil fields in Iraq--albeit with very slim margins for the companies involved--but
are unappealing for many companies facing the gamble of oil exploration, said
KBC Energy Economics analyst Samuel Ciszuk.
"You don't know what you're going to find," said Ciszuk. "You
have all these uncertainties, the most rigid contract framework...and delays
building up because of slow state decision-making."
Al-Shahristani has previously said Exxon would have to choose between its deal
to explore six areas in
Kurdistan
and
its central-government contract to develop the 370,000 barrels a day West Qurna
Phase 1,
Iraq
's
second-biggest field with proven reserves of more than 8.7 billion barrels.
"We are still waiting for Exxon to answer our letters in which we warned
that it has to choose between contracts in
Kurdistan
and
those in southern
Iraq
,"
the spokesman said, adding that depending on Exxon's reply the government would
make a decision about its existing contract in the south.
In December,
Iraq
's
Prime Minister Nouri al-Maliki met with senior Exxon executives during a visit
to the
U.S.
, and
said afterward that the Irving, Texas-based company had promised to reconsider
its dealings with the KRG.
The KRG has signed nearly 50 oil-and-gas deals with international oil
companies, mostly second-tier or wildcat explorers. The KRG was hopeful that
Exxon's presence would ease the passage of other majors, such as Total SA
(TOT), which is active in
Iraq
.
Some of the blocks in the Exxon-KRG deal are in a hotly contested oil-rich
territory claimed by both the central government and the KRG, stretching from
the Iranian border to the east and to the Syrian border in the northwest.
Baghdad
has already blacklisted
companies that maintain deals with the Kurds, excluding them from working
elsewhere in
Iraq
. Among
those is New York, N.Y.-based Hess Corp. (HES), which was barred last year from
competing in the fourth energy auction.
However, Adnan Al Janabi, chairman of the Oil and Energy Committee in the Iraqi
Council of Representatives, last week told Dow Jones Newswires that the Oil
Ministry doesn't have the legal authority to blacklist Exxon over its
Kurdistan
contracts.
An ExxonMobil media officer in the
U.S.
declined to comment.
Iraq
--holder
of the world's third largest oil reserves, estimated at 143 billion
barrels--auctioned and awarded in 2009 and 2010 some 11 oil fields to
international oil firms.
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