* Iraq had appealed to Obama to stop Exxon deal
* Exxon was first oil major to move into autonomous region
* Chevron buys oil block shares from India's Reliance
By Aseel Kami and Braden Reddall
BAGHDAD/SAN FRANCISCO, July 19 Iraq's prime
minister said U.S. President Barack Obama backed Baghdad's
concerns over Exxon Mobil's oil deal with the Kurdistan
region and had emphasised Washington's respect for the Iraqi
constitution and laws.
Prime Minister Nuri al-Maliki issued the statement as U.S.
oil major Chevron Corp confirmed its purchase of 80
percent of two blocks in Kurdistan in a move that may infuriate
the central Iraqi government, which wants all oil deals to pass
Baghdad is embroiled in a deep dispute with the autonomous
Kurdish region over energy exports and has asked Obama to stop
Exxon exploring for oil there, saying it could threaten
stability. On Thursday it welcomed Obama's written response.
"We would like to confirm that the letter was positive and
convincing and stresses its respect for the constitution and
Iraqi laws, in the same manner as the Iraqi government is
seeking," a statement from Maliki's office said.
"The Iraqi government will take all necessary measures in
applying the law and will not allow the company to implement
these contracts," it said, referring to the deals signed with
Kurdistan. Exxon declined to comment.
An industry source familiar with U.S. oil operations in
Kurdistan said the Obama administration was continuing to
discourage firms from moving into the northern region, the
government of which is based in Arbil.
"Washington is saying, 'This is a bad time to go into
Kurdistan, given the sabre rattling between Baghdad and Arbil,'"
the source said.
Kurdistan said in June that it expected more oil majors to
follow Exxon in the next few months in striking deals there.
France's Total has already said it was interested
in investments in the region, drawing a veiled threat from
Baghdad which said French companies should avoid unsanctioned
Exxon became the first oil major to move into the northern
region in mid-October when it signed a deal with the Kurdistan
Regional Government (KRG). Apart from Total, Norway's Statoil
is also looking closely at KRG exploration deals,
industry sources have said.
"People are looking at the commercial terms on offer in
Kurdistan and they're voting with their feet," said a senior
Western oil executive.
"The margins on Iraq's service contracts are slim and Arbil
is offering more lucrative production sharing deals."
CHEVRON SEES "PROMISE"
Chevron, the second-largest U.S. oil company, said it sees
"considerable promise" in Kurdistan. It is purchasing the Sarta
and Rovi blocks from India's Reliance Industries Ltd,
where it will be the new partner of Austria's OMV AG -
holder of the other 20 percent interest.
Though it chose not to participate in Iraq's four oil and
gas licensing rounds, Chevron said it would still monitor
opportunities in both the north and south of the country. It was
the first big oil company to offer Iraq technical assistance and
training following the U.S.-led invasion.
"The opportunities in Iraq's licensing rounds didn't compete
in Chevron's investment portfolio," said an oil industry source.
"The commercial terms in Kurdistan were attractive, an
opportunity presented itself and Chevron moved on it."
The U.S. major has advised Baghdad of its Kurdish deal and
is in the process of setting up an office in Arbil, he said.
An Iraqi oil ministry spokesman declined to comment directly
on the Chevron deal on Thursday but repeated Baghdad's warning
to foreign energy companies.
"The government attitude is clear. Contracts signed outside
the framework of the federal government are considered as
illegal," Assim Jihad said.
Iraqi oil industry sources said Baghdad might strike hard
against Chevron, going further than just barring it from oil and
gas investment projects. Chevron has a contract to buy 167,000
barrels of Iraqi oil per day, which Iraq could seek to cut in
protest, they said.
At the same time as punishing those dealing with Kurdistan
directly, the central government could also reward other
companies developing Iraq's giant southern oilfields by
improving commercial terms, the sources said.
The dispute over oil exports is part of a broader clash
between Iraqi Arab-led central government and the Kurdish
government over territory and regional autonomy that many see as
a potential flashpoint for conflict since the last American
troops left Iraq in December.
OPEC-member Iraq holds the world's fourth-largest oil
reserves and is expected to be a major source of future oil
Eager to rebuild its dilapidated infrastructure, it has
signed a series of contracts with foreign oil companies that
target total oil production capacity of 12 million barrels per
day (bpd) by 2017, up from about 3 million bpd. Most analysts
see 6 million to 7 million bpd as a more realistic goal.