Iraqi Prime Minister Nuri al-Maliki has asked US President Barack Obama to intervene to stop ExxonMobil from proceeding with a deal with the Kurdistan region that he warned would have dire consequences for Iraq's stability, an aide said.

The US oil major angered Baghdad last year by signing an exploration deal with the Kurdistan Regional Government (KRG) in the north, which the central government deemed illegal.

Since the last US troops withdrew from Iraq in December, disputed areas between autonomous Kurdistan and Baghdad have been seen as a potential flashpoint for conflict as tensions between the two regions rise, without the buffer of a US military presence.

“Prime Minister Nuri al-Maliki explained to president Obama in the letter sent this month the dire consequences of the Exxon deal and its negative impact on Iraq’s stability,” al-Maliki’s media adviser Ali al-Moussawi told Reuters yesterday.

Iraq’s oil minister said in April that Exxon had written to Baghdad informing it that it had suspended work in the Kurdish region.

“Despite Exxon’s letters about their freezing of their work in the region, we still receive information that suspicious work is going on relating to their exploration activities,” al-Moussawi said.

The KRG announced in November the signing of a deal for six exploration blocs with Exxon, the first major oil company to deal directly with the Kurds in northern Iraq.

Exxon is one of the oil majors participating in massive projects intended to make Iraq the world’s biggest source of new oil over the next few years, but the US company’s decision to sign a deal with the KRG has infuriated Baghdad.

Exxon was banned by the central government from competing in the country’s fourth bidding round because of the deals it had signed with Kurdistan to explore in their region and some disputed areas.

“The point of the message was clear. The US administration must intervene,” Moussawi said.

Al-Maliki met with Exxon during his visit to the US in December and explained to the company that its deal with Kurdish authorities violated the law and could generate serious problems, al-Moussawi said.

“Offering Exxon an exploration deal without central government knowledge and approval has been and will stay illegal,” al-Moussawi said.

Iraqi Kurdistan, which has its own government and armed forces, has already clashed with the central government over autonomy and oil rights, and halted its crude exports in April after accusing Baghdad of not making due payments. Frustrated by the long-standing disputes with Baghdad, Kurdistan has started plans to start exporting its crude oil along a new pipeline to the Turkish border by August 2013.

Kurdistan’s energy minister said in London yesterday that the autonomous region expects more oil majors to follow Exxon in the next few months in striking deals. Exxon is keeping a low profile and has declined to comment. But industry sources say the company has issued a tender for drilling rigs.

“The market is very buoyant in Kurdistan. We have a lot of majors circling around looking at new PSCs (production-sharing contracts) and certainly mergers and acquisitions,” Natural Resources Minister Ashti Hawrami told the conference in London. “So in the next few months, we expect to see another two or three major companies coming and working in Kurdistan.”

French major Total is looking to secure a package of exploration blocks in Kurdistan, and Norway’s Statoil is also looking closely at KRG exploration blocks, industry sources have said.

Exxon’s deal, involving six blocks, angered the Iraqi central government in Baghdad, which holds that any oil contracts signed with Kurdistan are illegal.

Arbil and Baghdad are locked in a long-running feud over oil and land.
Exxon is keeping a low profile in Kurdistan, but industry sources said the company has issued a tender for drilling rigs.

Exxon declined to comment.
The KRG halted oil exports in April due to a payment dispute with Baghdad. Before then, contractors in Kurdistan were producing and exporting about 200,000 bpd, said Hawrami, who was adamant shipments would resume.

“The oil will flow ... regardless of an agreement, and I infinitely prefer an agreement,” he said.

“When you have 1mn bpd stranded, it will find its way to the market despite the political haggling.”

About 60,000 bpd is still being supplied to the domestic market. Industry sources say Arbil is prepared to start sending crude by truck to Turkey soon, possibly as part of a crude-for-products swap.

Kurdistan holds an estimated 45bn barrels of oil reserves, and 25 to 30 exploration wells are now being drilled by contractors, the minister said. By 2014 to 2015, output should grow to 1mn bpd, he said.

“This is guaranteed and doable. We can achieve it if we eliminate the political obstacles in front of it,” Hawrami said.

“We expect more discoveries this year to bring us to our new target of 2mn bpd by 2019.”