Total S.A. has become the latest big oil company to shift the focus of its Iraq ambitions toward semi-autonomous Kurdistan.
After finding Baghdad contracts economically challenging, the French company will not take part in the next licensing round. Instead they are looking at investing in Kurdistan, a move which will prevent them from making future deals in the south.
After declaring a seven per cent increase in profits for 2011 at $3.6bn (4.2tr IQD), Total announced that they will expand their investment budget.
From what we are hearing the conditions of the fourth bidding round in Iraq do not appear very attractive,” said Christophe de Margerie, Total’s chief executive, at a press conference.
“The interest in Kurdistan is that there are plenty of gas and oil reserves and contractual conditions are better.”
After the second Gulf war, Iraq opened its oil industry to foreign investment.
Its vast reserves and hopes of drilling 12m barrels per day — greater than Saudi Arabia’s reserves — drew in Western oil companies which had largely been ejected from the region in the 1970s.
But tough terms demanded by Baghdad have been a disappointment for some.
The PetroChina-led consortium won a contract to develop the Halfaya oilfield in the Missan province but has long argued the $1-$2 per barrel fee offered by Iraq is not generous enough.
Norway’s Statoil, which is believe to have struggled with the $1.15 fee they accepted, has told Iraq it wants to exit its stake in the 12.9bn barrel West Qurna Phase-2 oilfield in southern Iraq.
While Kurdistan offers better terms, the reserves are smaller, and companies – such as China’s Sinpec and U.S. oil group Hess, face being banned by central government from investing in the south as well, as Baghdad disputes the KRG’s right to issue contracts.
Exxon Mobil became the first of the big Western oil groups who held a Baghdad contract to invest in Kurdistan last year, prompting a long-running spat.
Abdul Mahdy al-Ameedi, head of Iraq’s contracts and licensing division, told Reuters on Thursday Exxon should freeze its activities in Kurdistan if it wished to maintain its license to develop Iraq’s supergiant West Qurna-1 oilfield.
Exxon has already been stripped of its role as project leader for a multi-billion-dollar water injection scheme that is core to the development of Iraq’s supergiant oilfields in the south, he added.
Kurdish and industry sources told Reuters earlier this month Total has been mulling whether to risk Baghdad’s ire for some months.
Source: AK News