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ExxonMobil signs exploration deal with Iraqi Kurdistan

Exploration & Production

The recent deal signed between ExxonMobil and the Kurdistan Regional Government (KRG) has caused a political storm with the Iraqi government threatening to pull the oil majors current contracts in Southern Iraq.

ExxonMobil has signed agreements to explore for oil and gas in six blocks in the Kurdish region of Iraq, marking it the first major international oil company to reach such an agreement.

Two more companies

Ashti Awrami, natural resources minister of the KRG added that KRG is also in discussions with at least two other international oil companies.

"We have over the last few months been talking to at least three significant companies. We have space for one to three international oil companies to come to us."

Awrami declined to name the other two interested companies but he revealed that Exxon had approached the KRG back in May and the deals were signed in mid-October.

Dispute followed  keenly

Other oil companies will be following the developments of this dispute keenly as it could have an impact on companies venturing into Kurdistan. If the KRG can start to attract other major international oil companies, it could intensify the pressure on the federal government to allow the contracts.

Hussain al-Sharistani, the Iraqi deputy prime minister in charge of oil affairs said: "The Iraqi government will deal with any company that's breaks its laws in the same way that it has dealt with similar companies in the past."

Up to now, the central government in Baghdad has prevented oil companies that operate in Kurdistan from working in the oil-rich southern fields. The central government has already warned Exxon from going ahead with the deals with KBR.

Sensitive issue for Iraq

Abdul Mahdi al-Ameedi, head of petroleum contracts and licensing directorate at Iraq's Oil Ministry, said to Dow Jones Newswires: "Exxon should choose between either continuing with its deal with the Kurdistan Regional Government or lose its contract in southern Iraq."

"We are not going to give Exxon a long time to decide," he said. "This is very sensitive issue and companies working in southern Iraq such as BP, Lukoil, Shell are watching the situation closely."