Iraq Writes Obama, Fumes Over Exxon’s Kurdish Deal

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Exxon Mobil

Iraqi prime minister Nuri al-Maliki has written to President Barrack Obama seeking his intervention in Exxon Mobil‘s (NYSE:XOM) plans to explore areas in the semi autonomous Kurdish region. [1] Exxon entered into a deal with the Kurdish Regional Government (KRG) to explore six blocks for oil and gas last year. The central government in Iraq disputes the authority of regional governments to grant exploration licenses to oil and gas companies. Iraq also banned Exxon from participating in its latest round of auctions because of the Kurdish deal. Despite the Iraqi government’s opposition, Exxon has not backed down from the deal with the KRG as the regional government offers more attractive terms for explorers.

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High stakes game

The Kurdish region is estimated to hold around 40 billion barrels of oil and additional gas reserves, and the KRG is pursuing options with international energy players to invite them to begin exploration in areas under its control by offering attractive production sharing terms. The Iraqi government, on the other hand, does not recognize such agreements by the KRG and has penalized companies harshly for entering into such deals.

Exxon has been banned from participating in the government’s recent auctions, and in the latest move, Iraqi Prime Minister is seeking direct intervention from Washington to prevent the company from going ahead with the deal, warning that it presents ‘dire consequences’ for Iraqi security. [1]

Exxon’s deal with the KRG is widely seen as a calculated move to gain access to major reserves while avoiding any major backlash as Iraq still faces issues in attracting foreign capital. The White House said that it has not yet responded to Mr. Maliki’s letters.

Exxon is well known for resisting political pressure from influencing its decision-making. In Steve Coll’s book Private Empire, the author recalls how former U.S. President George Bush had, in reference to the company, told Indian Prime Minister ‘Nobody tells those guys what to do’. [2] The Kurdish deal could be a major factor in helping the company increase its liquids production volumes in the long term.

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  1. No Obama response yet to Iraq plea on Exxon-Kurd deal, U.S. says, Reuters [] []
  2. Oil’s Dark Heart Pumps Strong, NYT []