Wednesday, Nov 07, 2012

By Hassan Hafidh

BAGHDAD--U.S. oil company Exxon Mobil Corp. (XOM) has informed Iraq's national oil company that it wants to leave the huge West Qurna 1 oil field redevelopment project, an Iraqi oil official said Wednesday.

Exxon Mobil, which is also stepping up plans to explore for oil in Iraq's semi-autonomous Kurdish region, has sent a message, "to the South Oil Co. in which it expressed its wish to sell its stakes in West Qurna 1 oil field.," said Abdul Mahdy al-Almedi, head of Iraq's petroleum contract licensing directorate, in an interview with Dow Jones Newswires. It was not clear exactly how the U.S. company planned to proceed with the sale, he added.

Exxon Mobil operates the redevelopment of the West Qurna 1 project, designed to raise its oil output after years of neglect during decades of war and sanctions. The government has agreed to pay Exxon Mobil and its partner, Royal Dutch Shell PLC (RDSB.LN), $1.90 for each additional barrel of oil they pumped from the already-producing field. The fees would barely be enough to cover the companies' costs, and industry analysts say Exxon Mobil's exploration opportunities in Kurdistan look much more attractive.

The company signed an agreement with the Kurdish Regional Government in 2011 to explore for oil there, in defiance of Baghdad, which says only the central government has the right to grant such licenses. The central government has previously said Exxon Mobil must choose whether it wants to continue operating in southern Iraq, or move to Kurdistan, but that it can't do both.

After promising to freeze its operations in Kurdistan over the summer, the Wall Street Journal reported last month that Exxon Mobil is planning to start exploratory drilling there in early 2013.

The U.S. company has already ordered the purchase of oil-well casing heads and is negotiating a contract with an oil-services firm to start drilling in Kurdistan, a person familiar with Exxon Mobil's operations in the region told the Wall Street Journal.

Exxon Mobil declined to comment on those reports.

The U.S. energy giant's move to exit southern Iraq and push forward with its plans in Kurdistan, northern Iraq, suggests the central government's efforts to keep it operating solely in southern Iraq are likely to fail. This comes as talks between the Kurdistan regional government, or KRG, in Erbil and the federal government in Baghdad aimed at resolving differences over oil rights appear to have stalled again after a brief period of progress.

(James Herron in London contributed to this report) 


 
   Write to Hassan Hafidh at hassan.hafidh@dowjones.com

(END) Dow Jones Newswires

07-11-12 0914GMT