Iraq’s oil ministry will not cancel ExxonMobil’s field development contract at West Qurna 1, according to Nouri al-Maliki, the Iraqi Prime Minister.
“We haven’t cancelled its contract in the south,” said Maliki in an interview with the Wall Street Journal ahead of a scheduled state visit to Washington next week. “We are looking for a way for its [Exxon Mobil’s] other contracts in any area to be within the legal contexts, but as for cancelling its contract in the south, no.”
Maliki also claimed that Exxon’s production sharing contracts with the Kurdistan Regional Government are “frozen.”
The Oil Ministry initially took a hard line on hearing of Exxon’s contracts. Deputy Prime Minister for Energy, Hussain al-Sharistani, threatened that sanctions would follow, and the head of the Licensing directorate for oil contracts warned Exxon could be booted out of West Qurna 1 and replaced with Shell as operator, which already has a minority stake in the contract.
While the oil ministry has said Exxon has been barred from the fourth auction of oil field development contracts – which is in any event within the Directorate’s prerogative – Sharistani has backed off somewhat, saying the Iraqi government is “taking its time” in deciding how to punish the supermajor.
Baghdad has recently produced a draft budget which includes almost $100 billion in spending on the basis of oil prices remaining at or above $95 a barrel.
Taken with Maliki’s recent comments, Sharistani’s stance bears out suspicions that Baghdad had no clear legal mandate to strip Exxon of its role at West Qurna and that, given the investment needed in the field and the disruption a cancellation could cause, maintaining Baghdad’s blacklist policy is untenable.
The country also has to prepare for its most wrenching transition since the end of the ‘surge’ and in 2007, as the last American troops leave Iraq before 1 January. The Exxon headache – which touches on several fundamental issues affecting the government and its relationship with the provinces – could not have come at a worse time for Maliki’s administration.
Maliki, together with senior cabinet colleagues, is en route to Washington, where the Exxon deals are likely to be near the top of the agenda.
Having signed deals in the knowledge, including for two fields (Qush, Basiqua) in disputed territory, Exxon now seems wedded to Kurdistan’s ambitious maximalist position, jarring with US military and diplomatic efforts to keep contested areas around Kirkuk quiet for the time being.
Exxon is maintaining its post-KRG deal no comment policy regarding Iraq, even to the Iraqi government, which has instead taken its complaint to Washington.
