Exxon Mobil’s exit from giant Iraqi oil field not decided yet

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Azzaman, November 3, 2012

Exxon Mobil has not yet walked away from its technical service agreement for the southern West Quran-1 oil field, an Oil Ministry official said.

The U.S. oil giant was reported to have decided to quit the field, the world’s second largest with reserves estimated at 43 billion barrels of oil.

Differences between Exxon Mobil and the Iraqi government surfaced when the corporation signed a production-sharing contract with the Kurdish regional government for the development of six oil and gas blocks.

The deal with the Kurds angered Baghdad, which has repeatedly warned that it would deny any company the right to develop the lucrative oil fields in the south if found striking deals that do not pass through the Oil Ministry.

Despite tensions, Oil Ministry spokesperson, Asim Jihad said the sides were still talking and nothing has been decided yet.

“The ministry is following the matter which has not been settled so far,” he said.

The deal Exxon Mobil has with the Kurds, though more generous than the one it struck with the Oil Ministry, is bound to cause difficulties for the sides.

The firm is one of the world’s biggest oil majors and is the first international corporation of such size to be willing to work in the Kurdish region despite Iraqi government’s reservations.

But ExxonMobil’s deals is fraught with problems. It is certain to aggravate security conditions in the Province of Nineveh, of which the restive northern city of Mosul is the capital.

One of the blocks bought by Exxon is located in the outskirts of Mosul and in a so-called disputed area.

It is not clear how Exxon will develop the  block close to the district of Baashiqa, which administratively is part of Mosul, at a time the provincial authorities backed by the central government have vowed that they are not going to yield an inch of the provincial territory to Kurds.

Two more blocks, one in the Province of Kirkuk and another in the Province of Diyala, fall in the same category.

The areas, though under the control of Kurdish militias, administratively are outside the region that is officially assigned for the Kurds to administer on their own.