Kurds talk to two more oil groups

Kurdistan is in talks with at least two other major international oil companies after signing a landmark deal with ExxonMobil that has inflamed the political climate between the semi-autonomous region and Iraq’s federal government.

The revelation by Ashti Awrami, the natural resources minister of the Kurdistan Regional Government (KRG) came as he confirmed that Exxon had agreed a landmark contract to explore six areas in the region, sparking a furious backlash in Baghdad which has considered the move illegal.

“We have during the past few months been talking to at least three significant companies,” Mr Awrami told the Financial Times in an interview in Erbil.

“We have space for one to three international oil companies to come to us,” he added, declining to name the other two. Oil industry executives have speculated that Chevron from the US and ENI from Italy have been looking at the region which has been described as one of the last great hydrocarbon frontiers in the world. It is estimated to hold 45bn barrels of oil – about the same as Libya – and large amounts of gas.

If the KRG is able to attract another international major it could intensify the pressure on the federal government to allow the contracts. Baghdad has in the past banned companies that have ventured into Kurdistan from operating in the oil-rich southern region of the country where Exxon is already developing the giant West Qurna field.

Hussain al-Sharistani, the Iraqi deputy prime minister in charge of oil affairs, suggested at the weekend that Exxon would have to choose between Kurdistan and West Qurna.

“The Iraqi government will deal with any company that breaks its laws in the same way that it has dealt with similar companies in the past,” he said in a statement in reference to the ban.

Officials in Erbil, however, played down the rhetoric. Barham Salih, the prime minister of the KRG, urged “dissenting voices” in Baghdad that it was time to “move on”.

Oil executives are watching the spat closely because of its influence on other companies venturing into Kurdistan, even as they predicted Exxon’s move would spark consolidation.

Tony Hayward, the former chief executive of BP who has emerged at the head of Genel Energy, a Kurdistan-focused player, sounded an optimistic note about Exxon’s entry, saying that he suspected it would “ultimately ... hasten progress towards compromise” between the two governments who had yet to agree on a long-awaited oil and gas law.

Mr Awrami defended the legality of the contracts the KRG has signed, adding that the protests were “the same standard reaction” he had expected.

“We are a federal state, we adhere to the constitution,” he added.

He revealed that Exxon had approached the KRG in late May or early June and that negotiations moved relatively quickly. Both parties signed the deal on 18 October. Among the exploration areas is “a prize block” about 50km north of Erbil by the town of Salahadin.

Mr Awrami said Kurdistan would be exporting 175,000 barrels a day in 2012 from a current level of 100,000 barrels per day.

“It reminds me of the early days of the North Sea,” he said, in a reference to the way in which it was eventually developed through consolidation.