Exxon signs Kurd exploration contracts
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The Financial Times03:03:42 11 Nov. 2011
Exxon signs Kurd exploration contracts
By Sylvia Pfeifer, Energy Editor
ExxonMobil has become the first of the “supermajor” oil companies to venture into Kurdistan, in a controversial move that will be seen as a huge vote of confidence in the semi-autonomous region of Iraq but could spark a backlash in Baghdad.
Exxon, the largest international oil company, signed contracts with the Kurdistan Regional Government (KRG) last month to explore for oil and gas in six blocks in the region, according to an adviser to the KRG.
“The KRG has for the last few months been in discussions with a number of major oil companies. This resulted in the recent signing by ExxonMobil of contracts to explore in six blocks,” Michael Howard, an adviser to the KRG, told the Financial Times.
Iraq’s central government has been informed of the agreements, said another person familiar with the situation. ExxonMobil declined to comment.
Independent oil and gas companies, including US players Marathon Oil and Hess, have flocked to Kurdistan in recent years, attracted by its relatively untapped hydrocarbon wealth – the region is estimated to hold 45bn barrels of oil and between 100,000bn-200,000bn cubic feet of gas. Tony Hayward, the former chief executive of BP, recently emerged at the helm of Genel Energy, a Kurdistan-focused player.
Until now, however, the world’s supermajors such as Exxon, BP and Royal Dutch Shell, have held back from signing contracts for fear of antagonising Baghdad, which has said it believes the contracts are illegitimate.
ExxonMobil’s surprise decision could prompt calls from some political factions for the company to lose its position in Iraq. The company led the first US consortium to re-enter Iraq’s oil industry in more than 30 years in 2009 by agreeing to develop the giant West Qurna field. ExxonMobil is also building a multibillion-dollar water injection system that will be used by other foreign oil companies in diferent oil projects in southern Iraq. Oil companies inject water in the reservoirs to increase pressure and production rates.
However, people aware of the agreements said Exxon’s decision to agree contracts with the KRG could prove to be a catalyst for the region. The decision to invest comes just weeks before an end-of- December deadline for the US to withdraw its troops from Iraq.
Expectations have been rising that a long-awaited hydrocarbons law – which would involve the sharing of revenues – could be finalised by year’s end . Iraq’s prime minister, Nouri al-Maliki, and the KRG’s prime minister, Barham Salih, met in Baghdad last month and agreed to either amend a 2007 hydrocarbons law as agreed by all political factions or adopt the 2007 law as is, officials said at the time.
Exports from Kurdistan, which had been stymied amid the disagreement, have begun to flow, albeit slowly. At the moment, Kurdistan exports an average of 175,000 barrels of oil equivalent per day through Iraq’s state oil marketing board. Under a landmark deal negotiated with Baghdad in February, Kurdistan currently receives half of all revenue from the oil it exports. The deal allows producing companies such as Genel Energy, China’s Sinopec and Norway’s DNO, to recoup their investment costs.