Iraq Expects Exxon Response Soon on Possible Kurdistan Exit

Iraq expects a response soon from Exxon Mobil Corp. (XOM) on whether the U.S. oil company will abandon a separate oil exploration agreement it made with the semi- autonomous Kurdistan Regional Government.

The answer may come as soon as today, and based on the response the Baghdad federal government will decide whether Exxon can participate in the next round of exploration licenses scheduled for May, Iraqi Oil Minister Abdul Kareem al-Luaibi said at a press conference in Baghdad today.

Iraq’s central government has so far refused to recognize production-sharing agreements between foreign companies and Kurdistan, home to about 40 percent of Iraq’s 115 billion barrels of reserves. The central government insists on service contracts with foreign companies, rather than production-sharing contracts, and says it needs to pre-approve any agreements concerning energy resources.

Government officials in Baghdad have repeatedly urged Exxon to refrain from making deals with the KRG, threatening exclusion from opportunities in central and southern Iraq.

Exxon executives have declined to comment publicly on the matter. In an annual report filed on Feb. 24 the Irving, Texas- based company said exploration and production activities in Kurdistan “are governed by production sharing contracts negotiated with the regional government of Kurdistan in 2011.”

“The exploration term is for five years with the possibility of two-year extensions,” the Exxon annual report said. “The production period is 20 years with the right to extend for five years.”

Exxon already operates the West Qurna-1 field in southern Iraq, one of the nation’s biggest, in partnership with Royal Dutch Shell Plc.

Taken as a whole, the nation has the third-largest oil reserves in the Middle East, after Saudi Arabia and Iran, according to an annual statistical review by BP Plc. Iraq (OPCRIRAQ) pumped 2.76 million barrels a day in February, making it the third largest producer in OPEC, trailing those same two nations, according to Bloomberg estimates.

To contact the reporters on this story: Kadhim Ajrash in Baghdad at kajrash@bloomberg.net Nayla Razzouk in Dubai at nrazzouk2@bloomberg.net

To contact the editor responsible for this story: Stephen Voss at sev@bloomberg.net

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