New York Times

[SWFloridaGuy]

11-14-12 New York Times (By STANLEY REED) : Delicate Balancing Act for Western Oil Firms in Iraq. Iraq’s re-emergence as an oil power is inevitably sending ripples through the industry and the surrounding region. The country has surpassed Iran as the second-largest OPEC producer after Saudi Arabia, raising questions about whether other oil-producing countries may at some point need to trim production to accommodate a rising Iraq.

But the more immediate tensions are between the federal government in Baghdad and the semi-autonomous Kurdistan Regional Government, which is headquartered in Erbil in the north of the country.

The Kurds, who suffered terribly under Saddam Hussein, are determined to maintain their autonomy from Baghdad — not least by developing their own oil resources. Baghdad insists that only it has the authority to grant access to the country’s natural resources. But the Kurds are succeeding in bringing in the world’s top oil companies against Baghdad’s wishes.

Strains between the two governments were on display Wednesday at the Oil and Money Conference convened by the International Herald Tribune and Energy Intelligence Group, a provider of independent analysis and data to the global energy industry.

Hussain Al-Shahristani, the Iraqi deputy prime minister, who has been instrumental in devising contracts to rehabilitate Iraqi oil fields, confirmed in a session with reporters that Exxon Mobil was in the advanced stages of organizing a sale of its 60 percent stake in a premier Iraqi project, the West Qurna-1 field, to buyers approved by the Iraqi government.

Exxon and Iraq have been at loggerheads since Exxon signed an exploration deal with the Kurdistan government last year. Baghdad, and Mr. Al-Shahristani in particular, does not recognize Kurdish contracts with the oil companies and says they are illegal.

An Exxon Mobil spokesman, Patrick J. McGinn, declined to comment.

Mr. Al-Shahristani also warned the French giant Total and other companies that they faced being forced out of their Iraqi projects for having feet in both camps. “They must either decide to present their contract to the federal government or they are in breach of their contract” with Iraq, he said.

But Mr. Al-Shahristani is losing the battle. Exxon, Total, Chevron and Gazprom have all decided that Kurdish oil deals have sufficient profit potential to be worth risking Baghdad’s ire.

Philip Lambert, who heads the London-based advisory firm Lambert Energy, said in a talk at the conference that the boom in deals in Kurdistan, compared to a relatively moribund environment in Iraq proper, was a sign that the environment in Kurdistan is healthier.

One reason: As Mr. Al-Shahristani acknowledged, Baghdad’s contracts are among the toughest in the world. They offer such low returns that — along with continued security risks and infrastructure problems — companies are figuring that they would be better off making deals with the Kurds.

Under Kurdistan contracts oil companies can earn $3 to $5 per barrel, compared to about $1 per barrel on those in southern Iraq, according to Wood Mackenzie, a consulting firm in Edinburgh. So far the large companies have been signing exploration deals with Kurdistan, leaving several years for the two governments to reach deals before their blocks start producing.

Iraq, of course, is far more important to the global oil picture today, with more than 3 million barrels a day of production, while Kurdistan is struggling to export 200,000 barrels per day. But exploration in Kurdistan is still at a relatively early stage, having only started after Saddam’s ouster in 2003. Companies looking for oil there have enjoyed a high success rate.

Despite Mr. Al-Shahristani’s prickliness, there are signs that Baghdad and the Kurdistan government could be reaching an accommodation. Under an agreement reached last summer, Kurdistan has been putting oil into the main Iraq-Turkey pipeline. These exports had been suspended over payments disputes between Baghdad and Erbil, leaving companies like Genel Energy, now headed by the former BP chief Tony Hayward, with no other option but to sell their oil cheaply in the Kurdish market or truck it to Turkey.

Baghdad has also begun making payments and is counting on the Kurds to supply 250,000 barrels per day to the pipeline in 2013. A Kurdish adviser, who asked not to be named, said in an e-mail that by all appearances both sides want the arrangement to work.

Kurdistan’s success in attracting the big oil companies does seem to be influencing thinking in Baghdad. Mr.Al-Shahristani said there was nothing in Iraqi law that prevented Iraq from awarding so-called production sharing contracts that give companies a slice of the output of fields for exploration. Companies prefer these contracts to the service deals that Baghdad has offered so far, which give companies a per-barrel fee for renovating old fields like West Qurna and Rumaila, the largest field, where BP has already produced a billion barrels.

At the conference, Mr. Al-Shahristani dismissed suggestions that Iraq would have trouble replacing Exxon, saying that serious international companies were interested. But Baghdad’s “our way or the highway” approach could threaten Iraq’s huge oil ambitions. During his talk in London, Mr. Al-Shahristani suggested that he had dialed back his expectations for Iraqi oil production over the next few years to about 9 million barrels per day from the unrealistic 12 million barrels per day that Iraq would achieve if the oil companies delivered on the contracts they have signed.

Iraq is a member of the Organization of Petroleum Exporting Countries but does not have a quota, in recognition of its need for revenue to rebuild. Mr. Al-Sharistani said that once Iraq had reached 4 million to 5 million barrels per day, it could start discussing its production with the other OPEC members.

“We don’t think that Iraq is going to be squeezing any country out of the market,” he said. http://www.nytimes.com/2012/11/15/business/global/delicate-balancing-act-for-western-oil-firms-in-iraq.html?adxnnl=1&adxnnlx=1352908969-VXVTaE3ktKcKjh6yPbBeSA&_r=0

[DinarThug]

It's All About The HCL Baby ! More Than Half The Fighting In Parliament Revolves Around This Single Issue !

Not That They Couldn't Find Other Things To Fight Over Once It Got Resolved !

Thx For The Post SWFG ! Way To Bring The Wicked Stuff !

[KiaKaha]

Thanks for the lesion, SWFG, as always.

KK

MADD for Heather

[quadkidd1]

So the back story here is quite simply put is......

( OIL )

And this is what will drive our elusive RV.

When these regions hammer out an agreement that these corrupt opponents can live with then and only then will we see a change in our IQD.

IMHO......

Hopefully the greed factor and political landscape or lack there of will promote these guys to get off their a$$e's.

Thank You SWFG for the post!!!

Quad

[uncirculd]

Well Baghdad is greedy, they have lots of contractors to pay. (illegal goon squads) Not to mention the judicial. The higher the corruption the higher the price. I'd be in Kurdistan too. It's also safer. A lot safer. Baghdad just soon as blow up your oil rig that to pay you. That would be something to think about. The cost of your security in Baghdad is much higher. Your contractors are many and expensive.

They could pump million barrels a day, but it won't get them out of chapter 7 like the PM thinks. To me he has made the choice for the country to live in isolation. He's not complying with the SOFA, UNAMI, IMF, WTO. He will throw a bone just to keep them hanging on and this keeps them off his back until he can get up to 12 million barrels a day production and then he won't need the international community. He, Iran, and Syrai will go to war with the Sunni nations. Don't take this to heart, JMHO, but it appears to be heading that way. Unless he is stopped, it could go this way. He has managed to put off Erbil for 2 years, that also meant the rest of the organizations. Kuwait, is another classic example. Sends a bone now and then to comply as if he is trying. France was on to him and said it well at a United Nations meeting. You haven't done enough mr maliki.

[yota691]

Well Baghdad is greedy, they have lots of contractors to pay. (illegal goon squads) Not to mention the judicial. The higher the corruption the higher the price. I'd be in Kurdistan too. It's also safer. A lot safer. Baghdad just soon as blow up your oil rig that to pay you. That would be something to think about. The cost of your security in Baghdad is much higher. Your contractors are many and expensive.

They could pump million barrels a day, but it won't get them out of chapter 7 like the PM thinks. To me he has made the choice for the country to live in isolation. He's not complying with the SOFA, UNAMI, IMF, WTO. He will throw a bone just to keep them hanging on and this keeps them off his back until he can get up to 12 million barrels a day production and then he won't need the international community. He, Iran, and Syrai will go to war with the Sunni nations. Don't take this to heart, JMHO, but it appears to be heading that way. Unless he is stopped, it could go this way. He has managed to put off Erbil for 2 years, that also meant the rest of the organizations. Kuwait, is another classic example. Sends a bone now and then to comply as if he is trying. France was on to him and said it well at a United Nations meeting. You haven't done enough mr maliki.

Your right on again uncirculd...and this is JMHO...This right here is blowing my mind in this Article... (Under Kurdistan contracts oil companies can earn $3 to $5 per barrel, compared to about $1 per barrel on those in southern Iraq) they can't get this figure out...Heck all they are doing is sitting back and collecting..pure Greed folks on behalf of Iraq which is Mr. M.. Thanks SWFG

[SgtFuryUSCZ]

***///

Are they freaking out because it was recently reported the U.S. is going to surpass

them in oil refinement/exports...?

[uncirculd]

***///

Are they freaking out because it was recently reported the U.S. is going to surpass

them in oil refinement/exports...?

You know I got really suspicious of that. How are we going to do that? Are we pretending we are pumping it, or are we reselling the $35 dollar a barrel oil we get from Iraq? As much as my oil field friends have told me in the last 2 weeks oil has been laying off. Go figure.