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Iraq says to act against Exxon over Kurd deal


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UPDATE 1-Iraq says to act against Exxon over Kurd deal

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Chevron Corp




Exxon Mobil Corp




Wed Nov 16, 2011 12:11pm GMT

* Iraq warns to take steps to end Exxon contract

* Dispute brewing over north Kurdistan oil rights

* Official says Chevron, Eni also held Kurdish talks (Adds more remarks, background)

By Suadad al-Salhy

BAGHDAD, Nov 16 (Reuters) - Iraq will move to end a major contract witn Exxon Mobil's after the U.S. oil giant signed a deal with semi-autonomous Kurdistan to explore fields there, a senior Iraqi oil official said on Wednesday.

Exxon's agreement in Kurdistan and Baghdad's response sets up a power struggle between the Iraqi central government and multinational oil giants over the potential oil resources in the northern Kurdish region.

Baghdad and Kurdistan's regional authorities are in a long-running dispute over oil and land rights, and the former says all foreign oil deals signed with the Kurdistan region are illegal.

"Exxon has violated the ministry directions and instructions concerning the companies working in Kurdistan," said Abdul-Mahdy al-Ameedi, director of the oil ministry's contracts and licensing directorate.

"It's a violation of the contract and the law. As a consequence the oil ministry will take steps to end the contract. But this operation will need arrangements," he said without giving further details.

Exxon has a multi-billion dollar contract with Iraq's oil ministry to develop its 8.7-billion-barrel West Qurna Phase One oilfield in the south. The company has not commented on the Kurdistan agreement.

Challenging Exxon will be a tricky balancing act for Prime Minister Nuri al-Maliki's government as it seeks to rebuild the war-shattered economy.

Trying to end the Exxon deal could herald long legal negotiations that would sour the appetite of other investors. Exxon has gone to international arbitration before, for example in Venezuela over a nationalization move.

Ameedi said there had been no response from Exxon to the Iraqi government's communications with the company regarding the Kurdistan deal.

"Exxon hasn't answered us yet," he said.

He said the Kurdish government had also been talking to U.S. oil company Chevron and Italian operator Eni.

"We know that there is communication between them. There are talks," he said.

Chevron Corp. has only said it continues to be interested in pursuing opportunities in Iraq but has said it will not discuss specifics.

Iraq has signed multi-billion deals with oil majors to develop oil infrastructure and help it achieve output capacity of as much as 12 million barrels per day. Its current output is 2.9 million bpd. (Reporting by Suadad al-Salhy; writing by Patrick Markey)

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