LONDON Iraq is considering imposing sanctions on Exxon Mobil (XOM.N) after its decision to sign a deal with the country's Kurdish region, Deputy Prime Minister for Energy Hussain al-Shahristani said on Tuesday.
Oil and gas contracts must be approved by the Iraqi government, he said at an Iraq investment conference in London.
"The Iraqi government is considering sanctions, and will inform the company before they make a public announcement," he said, adding the United States government had been unaware that Exxon had been in negotiations with the Kurdish authorities.
"The position of the U.S. government has been that they were unaware of it and if they had been asked, they would have obliged (Exxon) to get approval of the Iraqi government."
The Kurdish Regional Government and the authorities in Baghdad have been at loggerheads since the Kurds announced recently that Exxon had signed a deal to explore in the region.
Baghdad, which considers such contracts illegal, threatened to cancel Exxon's licenses in the south of the country in response.
Iraq's Oil Minister Adbul-Kareem Luaibi said on Monday both he and Prime Minister Nuri al-Maliki had written to Exxon and were awaiting a reply.
Asked about the OPEC meeting in December, Shahristani said Iraq did not see the need for a production cut but there was concern over the outlook for demand in the light of euro zone debt problems.
"We are a bit concerned about the euro zone developments, we hope this can be taken care of," he said.
"So far there is no impact on demand for oil. If there is going to be stagnation or decreasing demand, OPEC will have to deal with that and adjust its production accordingly."
He said oil coming back on track from Libya meant that OPEC was able to provide the world's oil needs, and that for now, there was no need for a production cut.
(Editing by James Jukwey)