* Total buys 35 pct stake in two blocks from Marathon Oil
* Iraq governement officials says Total to be blacklisted
* Total to be operator of Safen block development
By Caroline Jacobs and Ahmed Rasheed
PARIS/BAGHDAD, July 31 French oil major Total
has bought a 35 percent stake in two exploration
blocks in Iraq's Kurdistan region, drawing an angry response
from the Iraqi government which has tried to bar companies from
dealing directly with the semi-autonomous region.
Total, which is following U.S. rivals into the area, was
warned by Baghdad on Tuesday it faced "severe" consequences for
buying the stakes in the Harir and Safen blocks from U.S. peer
Marathon Oil without the government's consent.
"We will punish companies who sign deals without the
approval of the central government and the oil ministry," said
Faisal Abdullah, a spokesman for Iraq's Deputy Prime Minister
for Energy Hussain al-Shahristani.
"Unless Total reviews the deals, it will face severe
consequences... Total will be blacklisted for violating Iraqi
law," he said without giving further details.
Total, seeking to tap Iraqi Kurdistan's vast oil reserves
and bank on more attractive terms than in the south of the
country, ignored earlier veiled threats to refrain from deals
with the Kurdish region.
"The Baghdad authorities were kept informed of Total's
intentions," a Total spokesman said on Tuesday, declining to
comment further after the Iraqi official's comments.
Total's investment comes as it seeks to grow its annual oil
production by 2.5 percent on average at a price of $100 a barrel
through to 2015. But lower output in this year's second quarter
due to several disruptions led Total to refrain from reiterating
the target for this year, referring to an investor day in
September for details.
A spokesman for the autonomous Kurdistan Regional Government
(KRG) did not immediately answer a request for details.
In Paris, the Energy Ministry and the Prime Minister's
office had no comment on the matter.
Total's Chief Executive Christophe de Margerie had
signalled in February that the group was considering investments
in Kurdistan since contractual conditions there were better than
in the rest of Iraq where it and its partners began production
at the south-eastern Halfaya field in June.
Both fields in the Marathon Oil deal are located south of
Iraq's border with Turkey. Seismic exploration of both fields is
expected to be completed by September.
The first exploration well on the Harir field was drilled on
Monday and the first exploration well on the Safen field will be
drilled next year, Marathon Oil said.
"These are enormous blocks. There's rarely a disappointment
in exploration in Kurdistan," said a Paris-based analyst who
declined to be named.
"They have a permit in the south of Iraq and at the worst
the government could renegotiate concessions or withdraw the
license. But these wells are not very profitable," he said.
He cited the exit of Statoil and Exxon as evidence of their
disappointment with the wells and the terms that Baghdad has set
for oil majors to operate them.
He said the challenge for Total and its peers doing business
in Kurdistan would be to transport the product, as Baghdad could
block the use of its pipelines in the south.
The deal will further strain ties between Baghdad and the
KRG which is caught up in a long-running political feud over oil
rights and disputed territories along its hazy internal border.
Exxon Mobil became the first oil major to move into
the northern region of Iraq in mid-October when it signed a deal
with the KRG. Norway's Statoil is also looking closely
at KRG exploration deals, industry sources have said.
The Iraqi central government in Baghdad considers that any
oil contracts signed with Kurdistan are illegal and it
blacklisted Chevron Corp, which followed Exxon into
Kurdistan this month, over such a deal.
Autonomous since 1991, Kurdistan has its own government and
armed forces, but still relies on the central government for its
budget drawn from the OPEC nation's oil revenues.
Kurdish officials accuse Iraqi Prime Minister Nuri al-Maliki,
a Shi'ite, of amassing power at the expense of Sunni and Kurdish
minorities, but Baghdad says Kurdistan is breaking with the
constitution by signing deals with foreign companies.
Increasingly chafing against Baghdad's authority, Kurdistan
is testing the central government with proposals for a more
independent energy policy.
Now one of the most prosperous parts of Iraq, Kurdistan has
been isolated from the violence and sectarian strife that still
beset the rest of the country.