UPDATE 2-Iraq tells Exxon to choose: Southern Iraq or Kurdistan

Ahmed Rasheed
Reuters Middle East

* Iraq tells Exxon must chose Kurdistan or southern


* Exxon should make a final decision in few days

BAGHDAD, Jan 27 (Reuters) - Iraq has told Exxon Mobil

it must choose between working in its southern oilfields

or in Kurdistan, and Baghdad expects the U.S. oil major to make

a final decision in a few days, its oil minister said on Sunday.

"We made it clear to Exxon in the last meeting that the

answer we expected from them is either to work in the Kurdistan

region or to work in southern Iraq," Oil Minister Abdul Kareem

Luaibi told reporters.

"Exxon Mobil cannot work in both fields at the same time."

Exxon was the first major oil company to sign agreements

with the government of the autonomous Kurdistan region in the

north, a move that increased tensions between Baghdad and the

Kurds in a long-running dispute over oil, territory and

political autonomy.

Baghdad says any deals signed with Kurdistan are illegal,

but the government of Kurdistan says the constitution allows it

to sign oil agreements without permission from the central


Exxon's chief executive met with Iraqi Prime Minister Nuri

al-Maliki and with Kurdistan's president last week to discuss

operations in both, while industry sources said the U.S. oil

major was mulling an offer from Baghdad.

Iraqi officials said at the time that Exxon was moving in

the right direction in its policy, but Kurdistan also said the

company remained committed to its Kurdish deals.

The feud between Baghdad and the Kurdistan enclave, which

has run its own regional administration and armed forces since

1991, has escalated since the KRG began signing deals with oil

majors such as Exxon and Chevron.

These deals have also prompted the central government to

warn companies they risk losing their assets in the southern

part of the country.

"Other oil companies that signed deals in Kurdistan region

should face the same scenario, and we have informed them,"

Luaibi said.


Luaibi also said Iraq had expanded crude export capacity at

its southern terminals on the Gulf, with the start of

simultaneous loading from two offshore Single Point Moorings

(SPMs), a significant step toward moving its expected increase

in exports.

"Today vessels have started to load crude from the two

Single Point Moorings at the same time, and that should

remarkably expand our export capacity," said Luaibi.

The minister spoke at the signing of a final exploration and

development contract with a Kuwait Energy-led group, part of

Iraq's drive to attract more foreign investment to upgrade its

oil and gas sector.

The contract provides rights to explore and develop oil

block 9, which is located in Iraq's southern Basra province.

Kuwait Energy will be the operator with a 70 percent working

interest, and Dragon Oil PLC will hold 30 percent.

"Block 9 contains substantial reserves of oil and gas, and

we have committed (that) $125 million will be invested at the

initial stage of exploration over the next two years," Manssour

Aboukhamseen, Kuwait Energy's chief executive, said at the

signing ceremony.

OPEC member Iraq is expected to be the world's biggest

source of new oil supplies over the next few years. It plans to

open up more rounds of auctions for oil and gas blocks.

"We are preparing now for a fifth bidding round for the

exploration and development of new blocks across Iraq," Luaibi


A handful of international companies won bids last May at

Iraq's fourth auction, which had a poor showing because of tough

contract terms.

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