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Shell Could Replace Exxon in Southern Iraq

NOVEMBER 21, 2011


BAGHDAD—The Iraqi oil ministry could ask Royal Dutch Shell PLC to develop Iraq’s supergiant West Qurna Phase 1 oil field in southern Iraq, if the government decides to terminate Exxon Mobil Corp.’s contract after it signed a deal to explore for oil in the Kurdish region of the country, a senior Iraqi oil official said Monday.

“We have many options,” said Abdul Mahdy al-Ameedi, head of the ministry’s petroleum contracts and licensing directorate, when asked what the ministry would do if the West Qurna 1 oil field contract with ExxonMobil is canceled.

“It is possible that Shell, or any other company, can replace ExxonMobil in West Qurna 1 field,” Mr. Ameedi said in an exclusive interview. “The partner of Exxon Mobil in West Qurna 1 is Shell and Shell is a giant and big company and it is well aware of and taking part in all operations and activities in the field.”

Exxon Mobil Iraq Limited is the lead contractor at West Qurna Phase 1, with a 60% stake, while Shell has 15% and the remaining 25% belongs to the Iraqi state company. ExxonMobil has signed six exploration oil and gas deals with the northern Kurdish region, which is at loggerheads with the central government in Baghdad over oil, land rights and distribution of power between the regional and central governments.

Baghdad has said any oil deals signed with the semiautonomous Kurdish region in northern Iraq aren’t valid because they haven’t been approved by the central government, and has suggested the ExxonMobil accord in the north could jeopardize its contract to develop West Qurna 1.

Mr. Ameedi said the ministry is in the process of writing a new letter to ExxonMobil asking why it signed deals with the Kurdistan Regional Government, despite a warning from Baghdad. The new letter will be the fourth the Iraqi government has sent the company without response.

“Taking a decision to terminate West Qurna 1 contract is easy and the (oil) minister can take such a decision tomorrow, but we don’t want to rush,” Mr. Ameedi said. “We want first to make our position very clear and based on legal and sound basis despite the terms of the contract consolidating our position.” ExxonMobil hasn’t so far commented. Chief Executive Rex Tillerson, who is currently in the Saudi capital Riyadh, declined to comment.

ExxonMobil is already producing about 370,000 barrels a day of oil from West Qurna. Many other large oil companies have similar contracts to redevelop aging oil fields.

These contracts have helped Iraq increase its oil output to around 2.9 million barrels a day in recent months, compared with 2.4 million barrels a day a year ago. They haven’t been especially lucrative but are seen as an entry point into one of the world’s most promising oil areas, analysts have said.

—Summer Said in Riyadh contributed to this article.

Write to Hassan Hafidh at [email protected]


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