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Iraq tries to deter other major oil
companies from signing with Kurdistan
28.6.2012
By Joel Wing —
Ekurd.net |
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June 28, 2012
Iraq’s government is afraid that Exxon Mobile’s
deal with the Kurdistan Regional Government (KRG)
might have opened the floodgates to other major oil
companies doing the same. The Kurds have followed
their own independent oil policy since 2002, even
before Saddam Hussein was deposed. Dozens of foreign
energy businesses have signed contracts with them
since then, but all were small to medium in size.
Baghdad blacklisted them from working in the rest of
the country, knowing that none of them had plans to
do so, and that none of them fit into its national
petroleum policy. Now other large corporations,
including France’s Total, have expressed interest in
going to Kurdistan. The central government has
recently warned the French about coming to an
agreement with the Kurds, but is likely to be as
unsuccessful as it was with Exxon.
Deputy Premier Hussein Shahristani has tried to
stave off France’s Total from working with the
Kurdistan Regional Government. In June 2012,
Shahristani told France’s Ambassador to Iraq that
French oil companies working in the country should
not sign contracts with other entities, meaning the
Kurds. This was the second time the deputy prime
minister had issued a warning. Back in February, he
said that no oil contract could be signed without
going through the Oil Ministry when stories first
emerged that Total was interested in the KRG.
Shahristani is in charge of Iraq’s energy policy. He
has been the strongest opponent of the Kurds’
independent petroleum strategy ever since he was the
Oil Minister in Prime Minister Nouri al-Maliki’s
first administration. It was no surprise then that
he was at the forefront of trying to deter Total
from coming to an agreement with the KRG after it
already won a contract for the Halfaya field in
Maysan in 2009 with the central government.
Shahristani’s warnings came in response to news
stories of Total becoming more interested in what
the Kurds had to offer. In mid-June, KRG Natural
Resource Minister Ashti Hawrami told the press that
other major oil companies were going to sign
contracts with his ministry after Exxon did. That
came amongst reports that both Total and Norway’s
Statoil might enter Kurdistan. In fact, the CEO of
Total, Christophe de Margerie stated that his
company was already in talks with the Kurds in
March, and might have sent delegates to the region
as early as January. The reason why Total has
threatened its existing contract with the Oil
Ministry is because it has grown unhappy with the
terms it received, and has been complaining about
them for almost a year now. CEO Margerie has
speculated that the company may not be able to
recover its initial investment with the low
remuneration fees it agreed to for instance.
Although Kurdistan has much smaller reserves, and
the initial work might just be for exploration, the
KRG offers more profits than the central government,
and a better business environment with less red
tape. These were the exact same reasons why Exxon
entered the Kurdish market at the end of 2010. It
too grew tired of the endless delays it found with
Baghdad over everything from getting its workers
into the country to payments. It also feels that it
should be able to work in any part of the country.
Total seems to be following the exact same strategy.
Exxon’s deal with the Kurds has opened up all kinds
of problems for the central government. Baghdad has
been unsuccessful in trying to change its mind,
because it knows that the corporation has the upper
hand. If the Oil Ministry were to void its contract
it would not only be open to a lawsuit, but would
also add more problems to the already difficult
relationship that it has with many of the other
energy companies working in southern Iraq. Total
finds itself in the same situation. It too has grown
tired of the hassles it has to go through at the
Halfaya field, especially because it is worried that
it will never make any money off of it. It therefore
is following Exxon’s lead by entering into
negotiations with the KRG over working there. It
also believes that it should be able to operate in
both northern and southern Iraq.
The central government finds itself in a battle of
wills with the very corporations that it initially
welcomed into the country three years ago. Baghdad
appears to be losing,www.ekurd.net
especially if Total does eventually come to terms
with the KRG, but it still holds a few cards in its
hands. The two most important of which are that one,
it controls the pipelines meaning that it can cut
off Kurdish exports, and two, with output in the
south taking off it doesn’t need the Kurdish
contribution like it did before. That means unless
the KRG and Baghdad come to some sort of compromise,
the foreign firms may be stuck doing nothing but
exploratory work and limited production for local
use and smuggling. Exxon and now Total seem to be
trying to force the hand of the central government
into coming to some sort of agreement with the
Kurds, but it’s yet to be seen who will win. As of
now, the Maliki government seems to be sticking to
its guns.
Sources:
Agence France Presse, “French Total seeks business
in Iraqi Kurdistan: chief,” 3/13/12
Hadi, Hemn, “Total in talks to invest in Kurdistan’s
oil,” AK News, 5/19/12
Hafidh, Hassan, “Total Submits Plan To Utilize Gas
From Iraq Missan Oil Fields –Official,” Dow Jones,
1/27/12
International Business Times, “Total Close to
Securing Oil-and-Gas Exploration Rights in Iraqi
Kurdistan: Report,” 1/29/12
International Crisis Group, “Iraq And The Kurds: The
High-Stakes Hydrocarbons Gambit,” 4/19/12
Jacobs, Caroline and Boselli, Muriel, “UPDATE
3-Total latest oil group to shift Iraq focus to
Kurdistan,” Reuters, 2/10/12
Reuters, “Iraq warns France against unsanctioned oil
deals,” 6/20/12
- “Shahristani says Total cannot sign Kurdistan
deals,” 2/12/12
Joel Wing, with an MA in International Relations,
Joel Wing has been researching and writing about
Iraq since 2002. His acclaimed blog, Musings on
Iraq, is currently listed by the New York Times and
the World Politics Review. In addition, Mr. Wing’s
work has been cited by the Center for Strategic and
International Studies, the Guardian and the
Washington Independent. You may visit his Blog
Musings On Iraq at musingsoniraq.blogspot.com
Copyright © 2012 Ekurd.net
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