* Iraq bars Chevron from oil deals with central government
* Chevron buys oil block shares from India's Reliance
* Baghdad, Kurds locked in dispute over oil deals
By Ahmed Rasheed
BAGHDAD, July 24 Iraq hit out at Chevron Corp
over its just-signed oil contract with Kurdistan,
barring it from any oil agreements with the central government
in a move meant to deter other companies from dealing directly
with the semi-autonomous northern region.
Baghdad has long held that contracts signed by the Kurdistan
Regional Government (KRG) are illegal, and last year Exxon Mobil
Corp aroused its anger by striking a deal with the
region while also running a project at a supergiant oilfield in
Baghdad retaliated by banning Exxon from an exploration
tender in May.
Chevron followed its larger rival into Kurdistan last week,
and Baghdad's action on Tuesday will be closely watched by other
oil majors, such as France's Total, which is widely
expected to be the next to make a Kurdish oil play.
"In line with Oil Ministry policy based on the constitution,
the Oil Ministry announces the disqualification of Chevron
company and bars it from signing any deals with the federal Oil
Ministry and its companies," the Oil Ministry said in a
Last week, Chevron said it would purchase 80 percent of two
blocks in Iraq's Kurdistan, an area where oil rights are a
subject of fierce dispute.
Responding to the ministry's rejection, Chevron highlighted
its near-decade-long relationship with Iraq's government, having
started a technical assistance program in 2003.
"Our goal is to help Iraq achieve its objectives for the oil
and gas industry by participating in opportunities that meet our
investment criteria," Chevron said in a statement.
Yet whatever the impact on goodwill, Chevron has no material
stake in the south to lose at the moment. The second-largest
U.S. oil company was qualified to take part in Iraq's four oil
and gas licensing rounds, but chose not to.
The company found the commercial terms of Iraq's service
contract unworkable, but - like other investors - found the
production-sharing contracts on offer in Kurdistan more
attractive, industry sources said.
Chevron has said it will continue to monitor opportunities
in both the north and south of Iraq. Iraqi oil officials said
the company had shown interest in developing the giant southern
Nasiriyah oilfield, which was not offered in any of the tenders.
"The reputation and credibility of Chevron and other
companies are being tested today, and we are fully confident the
result of its test is a total failure and it should feel ashamed
of its action," the Oil Ministry statement said.
Kurdistan said in June that it expected more oil majors to
follow Exxon in the next few months. Total, which also has a
stake in a project in the south, is widely believed to be close
to doing a deal.
"Total is waiting for the best time to proceed," said an
Iraqi oil executive. "After today's announcement, they may think
Just last month, Iraq asked U.S. President Barack Obama to
stop Exxon from exploring in Kurdistan, saying it could have
dire consequences for the country's stability. Iraqi Prime
Minister Nuri al-Maliki said Obama sent a "positive" written
Seemingly undeterred, Exxon is close to awarding a contract
for drilling rigs at its six exploration blocks in Kurdistan,
said Iraqi oil sources.
As part of its deal announced last week, Chevron is buying
the Sarta and Rovi blocks from India's Reliance Industries Ltd
, making it the new partner of Austria's OMV AG
, holder of the other 20 percent interest.
Baghdad has a long-running dispute with the KRG over oil,
land and sharing revenues and insists that it has the sole
authority to manage oil fields and sign deals in the north.
As well as Total, Norway's Statoil is looking at
KRG exploration blocks, industry sources have said. A move into
the north by a third big oil name could be a tipping point.
"Chevron has no contracts in the south, so that's likely to
minimise the fallout," an oil industry executive said. "If Total
joins the procession, that will signal the transition from a
trickle to a flood."