Iraq’s Oil Ministry is being kept waiting by Exxon for an explanation of their decision to breach Baghdad’s blacklist policy by taking up six exploration agreements with the Kurdish Regional Government.
The Ministry has so far sent four letters to Exxon asking for an explanation without response, according to a Reuters report, despite one being signed by Nouri Al-Maliki, the Prime Minister, and another by Abdul Karim al-Luaibi, the Oil Minister.
Exxon – which has not provided any public comment on the deals since they were disclosed by the KRG’s Natural Resources Minister Ashti Hawrami on 12 November – may have put its field development contract at the supergiant West Qurna phase 1 field at risk by making the deals.
Baghdad says contracts signed with the KRG are void because they give oil companies a proprietary interest in the region’s oil, contrary to the Iraqi constitution, something the KRG hotly disputes.
Abdul Mahdy al-Ameedi, head of the Oil Ministry’s petroleum contracts and licensing directorate, told Dow Jones Newswires that Exxon may be replaced at West Qurna 1 by Shell, which holds a minority (15%) interest in the development contract and is the operator of the Majnoon field.
“It is possible that Shell, or any other company, can replace Exxon in West Qurna-1 field,” Ameedi told Dow Jones. “The partner of Exxon Mobil in West Qurna-1 is Shell and Shell is a giant and big company and it is well aware of and taking part in all operations and activities in the field.”
Ameedi told Dow Jones the licensing directorate could terminate Exxon’s contract “tomorrow” if it wished to do so, though Exxon may dispute this, with any litigation of the issue likely to boil down to a trial of whether Baghdad or Erbil’s interpretation of Iraq’s constitution is valid.
Deputy Prime Minister for Energy Hussain al-Sharistanihas said that the government could pursue sanctions against ExxonMobil, perhaps by the end of the year.
“The Iraqi government is considering sanctions, and will inform the company before they make a public announcement,” Shahristani told reporters gathered at an oil conference in London, according to a Reuters report.
It is not yet clear under what legal authority the Iraqi government may sanction Exxon, although any legal action would be noxious for both parties in a country where politics dominates management of oil resources.
Early optimism that the US State department had advised on the deal has given way to an impression among analysts that Exxon has taken more of a gamble than its reputation as a conservative oil major suggests. Sharistani has denied the US would have supported Exxon’s moveover the head of Baghdad. One thing is for sure – Exxon will be the last to give its version of the story.
This article was updated at 09.46 on 23 November.
