Exxon Mobil intends to pull out of southern Iraq, in favor of moving forward with its Kurdish oil contracts, an energy expert source told Al-Monitor Wednesday on condition of anonymity. The oil giant’s contracts with Iraq’s Kurdish entity have been a source of ongoing legal dispute with the Iraqi central government in Baghdad.
Exxon Mobil informed the State Department this week of its intent to pull out of southern Iraq, Reuters subsequently confirmed Thursday, citing an unnamed American official.
Exxon had sought unsuccessfully to renegotiate the terms of its contract with Baghdad central government authorities, but Iraqi leaders had not been willing to set such a precedent, the western energy expert source said.
Baghdad will be even less inclined to do so if Exxon moves forward with its Kurdish Regional Government oil exploration contracts, Iraq expert Denise Natali said.
Exxon has signed contracts to start drilling in Kurdish Iraq by the end of the year, Ben Lando, of the Iraq Oil Report, reported Thursday. “The company ‘will start moving dirt in December,'” one official told Lando.
The oil giant may be gambling, however, that it can “leverage Baghdad through the KRG,” Natali told Al-Monitor Thursday. Unlike smaller oil companies, “it has lots of time.”
Exxon’s expected move comes amid growing Iraqi threats to award its West Qurna oil concession to a Russian or Tunisian firm.
Iraqi Prime Minister Nouri al-Maliki “is reportedly thinking of throwing out U.S. oil giant Exxon Mobil from the giant West Qurna-1 oilfield for signing an ‘illegal’ production deal with semi-autonomous Kurdistan and bringing in Russian companies instead,” UPI reported Wednesday.
Maliki visited Russia last week, and reportedly signed $4.2 billion worth of arms purchase agreements–one of the largest arms sales deals Russia has made in the past three decades.
Maliki “has been gunning for Exxon Mobil, the world’s largest oil company, since October 2011 when it signed an extensive exploration deal with the Kurdistan Regional Government, which runs the semi-autonomous enclave in northern Iraq which has long had ambitions of independence,” the UPI report said.
In June, Iraq surpassed Iran to become the second largest oil producer in OPEC.