The consortium of Russian shareholders behind TNK-BP Holding (TNBP.RS) are at risk of losing their oil contract in northern Iraq, a move that would likely further aggravate tensions between the shareholders and BP PLC (BP).
If the consortium were to lose the contract, which was signed in November 2007, it could place the British oil giant in a pickle because of its ambitions to further explore for hydrocarbons in Russia.
"There is concern about what TNK-BP's intent is. We signed the contract believing that TNK-BP was behind the contract," Kurdish oil minister Ashti Hawrami said in an interview here.
"Without TNK-BP behind the contract there is a risk the contract may not be valid," he said, adding he expected to meet TNK-BP executives here in Madrid amid a major oil industry conference. The autonomous Kurdish government has signed around 20 oil deals with foreign oil companies over the past year or so.
BP's refusal to let TNK-BP join the Kurdish project partly triggered a dispute between the British oil giant and its partners in the Russian oil and gas joint-venture.
In recent weeks, tensions between BP and its Russian billionaire partners in the joint Russian oil and gas venture, TNK-BP, have escalated into a full-fledged dispute with the Russian side saying BP frustrates the venture's international plans.
BP feared an involvement in Iraqi Kurdistan would anger the Iraqi central government and perhaps torpedo its hopes of gaining a foothold in southern Iraq, where most of the country's proven oil reserves - the third biggest in the world - are located. BP, along with a handful of other big oil companies, are set to sign service contracts this week.
Because of BP's reluctance to publicly back a deal with the Kurds, the Russian shareholders' consortium, Alfa-Access-Renova, decided to invest in Kurdistan through an affiliate company, Norbest.
However, people familiar with the matter said BP Chief Executive Tony Hayward committed in November last year to provide technical assistance to the project.
At the time, Hayward pledged "to provide whatever technical assistance is necessary, either via BP or TNK-BP, to this project as long as BP was not party to the transaction," a person familiar with talks told Dow Jones Newswires.
But BP's lack of official commitment is now putting the deal in danger. If BP were to confirm its technical involvement in Iraqi Kurdistan it could help its relationship with the Russian shareholders.
Such technical support could upset the Iraqi central government if it is seen providing any kind of backing for exploration in Iraqi Kurdistan. The Kurds have signed around 20 contracts with foreign oil companies the past year or so, angering Baghdad.
Hawrami said not having TNK-BP behind the contract would make it very difficult for Norbest to fulfill its contractual obligations.
BP wouldn't immediately comment and Norbest couldn't be reached for comment.