Kurdish government, ExxonMobil ink oil search deal

November 13, 2011 - 11:30 AM

SULAIMANIYAH, Iraq (AP) — The Kurdish regional government has signed a deal with ExxonMobil to explore oil fields in northern Iraq, Kurdish officials said Sunday, putting them in sharp conflict with Iraq's national government.

The government in Baghdad wants to control all energy contracts signed in Iraq. With the deal, ExxonMobil becomes the first oil major to do business in the Kurdish region in defiance of the central government's wishes.

The deal was announced Sunday by Kurdish officials at an oil and gas conference in Irbil in comments carried on Kurdish television. Details of the deal were published on Friday by the Financial Times newspaper.

The Kurdistan Regional Government has clashed with Baghdad over who has the right to sign deals with international oil companies to develop Iraq's vast energy resources.

The Kurds, who control three provinces in northern Iraq, want to be able to sign contracts with international oil companies to develop their own fields, while Baghdad maintains it has final authority.

Kurdish officials have already signed a number of contracts with smaller energy companies, but the deal with ExxonMobil is significant because it's the first with an international oil major.

At the conference, Kurdish Natural Resources Minister Ashti Hawrami vowed to press ahead.

"These deals are legal. There is no legal problem about them. We will go on with these deals," he said.

The Iraqi government thinks differently. Following the Financial Times story, the Iraqi government on Saturday issued a statement slamming the agreement.

"The Iraqi government will deal with any company that breaks its laws in the same way that it has dealt with similar companies in the past," said Deputy Prime Minister Hussain al-Shahristani in a statement.

The central government has previously blacklisted energy companies that signed contracts with the Kurdish government, so that they cannot work in the rest of the country or purchase crude oil.

Even so, it remained unclear what steps, if any, the central government will take against ExxonMobil, which is already developing one of Iraq's biggest oil fields. ExxonMobil is working with Royal Dutch Shell PLC to develop the 8.6 billion West Qurna Stage 1 field near the southern city of Basra.

An official at al-Shahristani's office said the deal between ExxonMobil and the Kurdish government was signed on Oct. 18. He said company representatives met with al-Shahristani to discuss the deal, but the deputy prime minister refused to approve it because it was outside the purview of the Oil Ministry.

The official did not want to be identified because he was not authorized to speak to reporters.

ExxonMobil has not commented.

Iraq sits on the world's third-largest oil reserves, with at least 115 billion barrels.

Iraq has been struggling to develop its oil and gas reserves after years of war, international sanctions and neglect. Foreign companies with the resources and expertise to develop the oil fields, such as ExxonMobil, are seen as key to helping revive the nation's vital energy sector.

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Associated Press writers Qassim Abdul-Zahra and Rebecca Santana in Baghdad contributed to this report.