The Iraqi government said Friday that Exxon Mobil Corp. (XOM) could lose
its current contract to redevelop the giant
West Qurna
oil
field if it proceeds with an agreement to explore for oil in the Kurdish region
of the country.
The spat highlights the political challenges for foreign companies operating in
Iraq
and threatens
to further inflame tensions between the
Baghdad
government and the semi-autonomous Kurdish region, who have long disputed the
right to grant oil licenses.
"Exxon should choose between either continuing with its deal with the
Kurdistan Regional Government or lose its contract in southern
Iraq
,"
Abdul Mahdi al-Ameedi, head of petroleum contracts and licensing directorate at
Iraq
's Oil
Ministry, said in an interview with Dow Jones Newswires.
ExxonMobil has signed agreements to explore for oil and gas in six blocks in
the Kurdish region of
Iraq
,
Michael Howard, communications adviser to the resources minister of the
Kurdistan Regional Government, told Dow Jones Newswires.
ExxonMobil declined to comment.
A number of smaller foreign companies already produce oil in
Iraq
's
Kurdish region, but ExxonMobil is the first of the major international oil
companies to reach such an agreement.
The KRG is embroiled in a long and often contentious dispute with
Iraq
's
central government over oil licenses issued to foreign companies. The dispute
has periodically caused the disruption of oil exports from the Kurdish region.
Iraq
's
central government sent ExxonMobil three warning letters before it signed its
deal to explore for oil and gas with the KRG, al-Ameedi said. "The letters
stressed 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," he said.
"We are not going to give Exxon a long time to decide," he said. "This
is very sensitive issue and companies working in southern
Iraq
such
as BP, Lukoil, Shell are watching the situation closely."
ExxonMobil is already producing around 370,000 barrels a day of oil from the
West
Qurna
field in southern
Iraq
,
under a service contract with the
Baghdad
government. Many other large oil companies, including BP PLC (BP), Royal Dutch
Shell PLC (RDSB.LN), Eni SpA (E) and Lukoil Holdings (LKOH.RS) have similar
contracts to redevelop aging oil fields.
These contracts have helped
Iraq
increase its oil output to around 2.7 million barrels a day in recent months,
compared with 2.4 million barrels a day a year ago. They haven't been
especially lucrative for the companies, who receive a nominal fee of a few
dollars for each extra barrel of oil they can produce.
Al-Ameedi said the KRG has approached other companies operating in southern
Iraq
,
without naming the companies. KRG communications adviser Howard denied this.
A spokesman said BP isn't talking to the KRG about similar deals. "We're
quite happy with what we've got in
Iraq
,
namely our commitment to developing Rumaila, the fourth-largest oil field in
the world," the spokesman said.
Shell declined to comment.
Iraq
's
council of ministers is expected to meet immediately after the Muslim Eid
holiday to decide whether ExxonMobil's existing contract to develop the super
giant
West Qurna
oil field remains valid, al-Ameedi said.
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Africa
to talk to President Jacob
Zuma about exporting some of the
Mozambique
gas
to
South Africa
.
"We spoke about what the impact of this new gas find will be on the
region," he said.
Eni is already exploring for shale gas in
South
Africa
with state-owned oil company
PetroSA.