Iraq plans to cancel Total's oil contract
Baghdad, August 1, 2012
Baghdad is working to cancel Total's share in southern Iraq's Halfaya oilfield after the French company announced it signed agreements to develop oil in autonomous Kurdistan, a senior Iraqi oil official said on Wednesday.
Iraq's central government says oil deals signed with the country's northern Kurdistan region are illegal. Total announced on Tuesday it had agreed to buy a stake in two blocks in the region, angering Baghdad.
"We are working to cancel Total's stake in the Halfaya contract. We will disqualify and terminate the contract of any company signing a deal with the Kurdistan region without the approval of the oil ministry," Abdul-Mahdy al-Ameedi, director of the ministry's contracts directorate, told reporters.
Total declined to comment on the Iraqi statement.
The French company followed US rivals Exxon and Chevron into Kurdistan, which analysts say has huge potential reserves and offers more attractive contract terms than the Iraqi central government's deals.
Its move will likely further strain ties between Baghdad and Kurdistan, which are already deeply at odds over a long-running dispute about who controls contested territories and oil rights along their hazy internal frontier.
In June, Total and its partners PetroChina and Petronas started production at Halfaya oilfield. Total has an 18.75 percent stake in the operation under a contract signed with the central Iraq government in 2010.
Total's chief executive Christophe de Margerie signalled in February that the company was thinking about Kurdistan investments because terms were better than those offered in a new bidding round by Baghdad for the rest of Iraq.
Norway's Statoil (STL.OL) is also looking closely at exploration deals with the Kurdistan authorities, industry sources have said.
"Production sharing contracts offered by Kurds represent a prize for most foreign oil firms, while Baghdad's tough-terms deals are more grin and bear," Ali Shallal, a legal expert specialised in drafting oil contracts said.
Iraq on Wednesday also signed an initial exploration deal with Russia's Bashneft and Britain's Premier Oil PLC to develop the country's oil block 12 as a part of its push to further develop its energy sector.
Iraq is also preparing to invite international oil companies to develop the giant Nassiriya oilfield and construct a refinery in a bidding round and a date will be set soon, Ameedi said.
The largely undeveloped Nassiriya field is listed as having reserves of under 5 billion barrels.
Pulling back from years of war, Iraq had ambitious plans for doubling its oil output over the next three years. Earlier this year its production rose above 3 million barrels per day for the first time in more than three decades.
Baghdad signed multi-billion dollar deals with foreign oil operators to develop its southern oilfields with the aim of becoming a major oil export player with output targets at around 8 million bpd by 2017.
Two years after those deals were signed, some report only modest gains and companies have been frustrated by infrastructure bottlenecks, payment disputes and logistical constraints. - Reuters