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Exxon Mobil moves on Kurdistan despite
Iraq threat
25.1.2012 |
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France's Total may be next to
follow Exxon into Kurdistan
January 25, 2012
ERBIL-Hewlęr,
Kurdistan region 'Iraq', — Exxon
Mobil, the first oil major to move into Iraqi
Kurdistan, is quietly mobilising in Erbil despite
strenuous objections from the central government.
Since the bold play came to light in November, the
company has kept silent - fueling speculation that
it froze the deal and bowed to Baghdad, which has
long held that all foreign oil deals signed with the
Kurdistan Regional Government (KRG) are illegal.
But Kurdish officials insist that investment is
going ahead and movement on the ground supports
their claims.
"They (Exxon) are definitely here and they are
definitely assessing living and working
accommodation," said a Western industry source in
Erbil, at the heart of Iraq's northern Kurdish
region.
"There are around 10 individuals here at any one
time looking at what it takes to fully mobilise here
- office space, housing space, these types of
things. No oil company comes in in a day."
Exxon executives met the region's Natural Resources
Minister Ashti Hawrami last week, sources in Erbil
said, and are preparing to issue a tender for
seismic work for some,www.ekurd.net
if not all, of the six exploration blocks acquired
in October.
The move north sparked fury in Baghdad, which is
threatening to take action against Exxon - in charge
of developing the supergiant West Qurna-1 oil field
in southern Iraq. Exxon has been summoned to the oil
ministry for final talks.
It is unclear whether the discussions would take
place before the U.S. major's fourth quarter results
on Jan. 31 - when it is also expected to go public
with its Kurdistan investment.
In the meantime, however, it is business as usual -
production at West Qurna-1 has risen to about
390,000 barrels per day and Exxon continues to lead
a multi-billion dollar water injection project that
is crucial to boosting output in the south.
CONSOLIDATION
Before signing the deal with Kurdistan, Exxon was
sure to have weighed any possible legal challenges.
"I'm sure Exxon has more lawyers than probably there
are Ministry of Oil officials in Baghdad," said the
industry source.
Such calculations are likely to influence other oil
majors who may be considering moving into Kurdistan,
and the lack of concrete action from Baghdad as yet
is sure to reinforce the belief that it could prove
a sound investment.
The KRG's Hawrami told Reuters this month the KRG
was in talks with other oil majors and he expected
further agreements to be signed in the next few
months.
Lack of security, political instability, bureaucracy
and the relatively unattractive oil deals in the
rest of Iraq are driving international oil majors
towards following Exxon's lead and signing
exploration and production contracts with Kurdistan.
After Exxon snapped up the last unclaimed Kurdish
territory, new arrivals will be looking to farm into
existing blocs. France's Total is keen to move into
the north, sources said, and a link up with
Anglo-French explorer Perenco in the Sindi-Amedi
block along the Turkish border is one scenario.
Total also has a minority stake in the Halfaya oil
field in southern Iraq.
Other names frequently mentioned are Eni and Lukoil
- that are also involved in the south of Iraq.
Chevron and Conoco Phillips, which have nothing at
stake, may also be interested, said the Western
industry source.
"Ashti Hawrami was very clever in the way he set up
the oil industry here, starting with small companies
to get things off the ground," said an Western oil
executive who declined to be named. "It was almost
designed to lure in the oil majors, and that is what
we are seeing now."
With the KRG estimating it has 45 billion barrels of
oil reserves, oil executives continue to mill around
the luxury five-star Rotana hotel in the Kurdish
capital Erbil.
While the calculation and hard-bargaining goes on
behind the blast walls of ministries and the smoked
glass of swanky hotels, the city of Erbil is showing
all the signs of an oil boom town in the making, a
far cry from the dusty backwater before 2003.
Now the latest Porsches, Maseratis and Range Rovers
jostle with the albeit largely new pick-up trucks
preferred by the masses on the still pot-holed
roads. Five-star hotels are swiftly springing up and
Kurdish shoppers buy designer brands at swish
shopping malls with an air of confidence in the
future.
By Jon Hemming, Reuters
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Reuters
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