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ANALYSIS-In Iraq, oil majors play north versus south=2

Source: Thomson Reuters Foundation - Thu, 5 Apr 2012 09:54 GMT
Author: Reuters
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firms' profits to be decided later.

But Baghdad and Arbil argued from the outset over how much oil was being pumped and how much money was owed.

This week, Kurdistan said it had halted those exports because Baghdad had failed to pay the companies for their oil. Iraqi government officials said Kurdistan was failing to meet its export obligations and illegally smuggling oil abroad.

Oil firms may have hoped that Exxon's push into Kurdistan would act as a catalyst to force the two sides to work together and enact an oil law. But for now, the increasingly shrill rhetoric on both sides hardly inspires confidence that a solution is growing closer.

When Kurdistan's government announced last year that Exxon had agreed to exploration deals for six Kurdish fields, Baghdad responded with outrage. Deputy Prime Minister Hussain al-Shahristani - architect of Baghdad's oil programme - said the U.S. firm could forfeit the contract on its huge West Qurna-1 oilfield in the south if it did not halt work with the Kurds.

Baghdad has since barred Exxon from bidding in the next round of oil deals, although it says the decision is not final. Exxon was also removed from its lead role in a water injection project in the south, although Iraqi officials denied the move was linked to the Kurdish deal.

The central government now says that Exxon has written to it twice since early March to say that its deals with the Kurds have been suspended. The Kurds say Exxon has not halted work in Kurdistan and have challenged Baghdad to publish Exxon's letters.

Total has become the second supermajor to say it is considering investing in Kurdistan, although it has not yet announced deals there. Chief executive Christophe de Margerie, long a critic of Iraq's service contracts, said Total will not seek deals in the central government's next bidding round.

The conditions on offer from Baghdad, he says, are not attractive enough. (Editing by Peter Graff)

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