Exxon Mobil, the first oil major to move into Iraqi Kurdistan, is quietly mobilising in Arbil despite strenuous objections from the central government.
Since the bold play came to light in November, the company has kept silent – fuelling speculation that it froze the deal and bowed to Baghdad, which has long held that all foreign oil deals signed with the Kurdistan Regional Government (KRG) are illegal.
But Kurdish officials insist that investment is going ahead and movement on the ground supports their claims.
“They (Exxon) are definitely here and they are definitely assessing living and working accommodation,” said a Western industry source in Arbil, at the heart ofIraq’s northern Kurdish region.
“There are around 10 individuals here at any one time looking at what it takes to fully mobilise here – office space, housing space, these types of things. No oil company comes in a day.”
Exxon executives met the region’s Natural Resources Minister Ashti Hawrami last week, sources in Arbil said, and are preparing to issue a tender for seismic work for some, if not all, of the six exploration blocks acquired in October.
The move north sparked fury in Baghdad, which is threatening to take action against Exxon – in charge of developing the supergiant West Qurna-1 oil field in southernIraq. Exxon has been summoned to the oil ministry for final talks.
It is unclear whether the discussions would take place before the U.S. major’s fourth quarter results on Jan. 31 – when it is also expected to go public with its Kurdistan investment.
In the meantime, however, it is business as usual – production at West Qurna-1 has risen to about 390,000 barrels per day and Exxon continues to lead a multi-billion dollar water injection project that is crucial to boosting output in the south.
Before signing the deal with Kurdistan, Exxon was sure to have weighed any possible legal challenges.
“I’m sure Exxon has more lawyers than probably there are Ministry of Oil officials in Baghdad,” said the industry source.
Such calculations are likely to influence other oil majors who may be considering moving into Kurdistan, and the lack of concrete action fromBaghdadas yet is sure to reinforce the belief that it could prove a sound investment.
The KRG’s Hawrami told Reuters this month the KRG was in talks with other oil majors and he expected further agreements to be signed in the next few months.
Lack of security, political instability, bureaucracy and the relatively unattractive oil deals in the rest of Iraq are driving international oil majors towards following Exxon’s lead and signing exploration and production contracts with Kurdistan.
After Exxon snapped up the last unclaimed Kurdish territory, new arrivals will be looking to farm into existing blocs. France’s Total is keen to move into the north, sources said, and a link up with Anglo-French explorer Perenco in the Sindi-Amedi block along the Turkish border is one scenario.
Total also has a minority stake in the Halfaya oil field in southern Iraq.
Other names frequently mentioned are Eni and Lukoil – that are also involved in the south of Iraq. Chevron and Conoco Phillips, which have nothing at stake, may also be interested, said the Western industry source.
“Ashti Hawrami was very clever in the way he set up the oil industry here, starting with small companies to get things off the ground,” said an Western oil executive who declined to be named. “It was almost designed to lure in the oil majors, and that is what we are seeing now.”
With the KRG estimating it has 45 billion barrels of oil reserves, oil executives continue to mill around the luxury five-star Rotana hotel in the Kurdish capital Arbil.
While the calculation and hard-bargaining goes on behind the blast walls of ministries and the smoked glass of swanky hotels, the city of Arbil is showing all the signs of an oil boom town in the making, a far cry from the dusty backwater before 2003.
Now the latest Porsches, Maseratis and Range Rovers jostle with the albeit largely new pick-up trucks preferred by the masses on the still pot-holed roads. Five-star hotels are swiftly springing up and Kurdish shoppers buy designer brands at swish shopping malls with an air of confidence in the future.
