August 1, 2012 / 10:30 AM / 6 years ago

UPDATE 3-Iraqi Kurds win more oil deals, to restart exports

* Iraq to void Total’s Halfaya contract in southern Iraq

* Gazprom also takes stake in Kurdistan

* Baghdad, Kurds locked in dispute over oil deals

By Ahmed Rasheed

BAGHDAD, Aug 1 (Reuters) - Iraq’s Kurdistan pledged on Wednesday to restart oil exports in a bid to ease tensions with the central government, as firms from France and Russia ignored threats from Baghdad and joined U.S. peers to invest in the semi-autonomous northern region.

Iraq’s oil dispute with its Kurdistan region escalated after Baghdad threatened to cancel a contract of France’s Total for signing Kurdish deals and a unit of Russia’s Gazprom also entered the autonomous area.

Total and Gazprom followed U.S. majors Exxon and Chevron in signing oil accords with Kurdistan, which is already deeply at odds with Baghdad in a long-running dispute over control of territories and oil rights along their internal frontier.

Oil is at the heart of a broader conflict over political autonomy in Iraq as ethnic Kurdish officials in Kurdistan, with its own government and armed forces since 1991, chaff against Iraq-Arab-led central government’s authority in Baghdad.

OPEC member Iraq says only the central government can agree to petroleum deals, and has already punished foreign companies for signing up to explore for oil in the northern Kurdistan area.

In an apparent move to appease Baghdad, the Kurdistan Regional Government said on Wednesday it would resume oil exports from its region after it halted shipments in April due to disagreements over central government payments.

After Total announced on Tuesday it had agreed to buy a stake in two blocks in the region, Baghdad responded with a warning again it considered any deals with Kurdistan illegal and told the French company it would be punished.

“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.

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 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.

Gazprom Neft, the oil arm of Russian gas export monopoly Gazprom, said on Wednesday it had also acquired interests in two blocks in Iraq’s Kurdistan even after its international rivals angered the central Iraqi government.

Gazprom Neft will take 40 percent of the Garmian block, and 80 percent of the Shakal block. The regional government of the autonomous region will keep 20 percent in both. Gazprom Neft estimated the blocks contained potential resources of about 3.6 billion barrels of oil equivalent.

It already has a project in Iraq, near Iran’s border, where it expects to produce about 15,000 barrels per day from 2013.

Kurdistan will restart oil exports in the first week of August at 100,000 barrels per day (bpd), the region’s Ministry of Natural Resources said.

“The decision was a confidence-building measure aimed at solving once and for all the ongoing oil and gas issues in Iraq,” a statement on the KRG’s website said.


Pulling back from years of war, Iraq’s central government 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.

But 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.

That has made Iraqi Kurdistan an attractive alternative for oil explorers. Exxon was the first international oil major to enter into the Kurdistan region, which offers more investor-friendly production-sharing contracts to companies.

Norway’s Statoil 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 field 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.

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