Total should not sign oil deals with the Kurdistan region without Iraq’s approval, Deputy Prime Minister for Energy Hussain al-Shahristani said on Sunday, warning the French major would bear the “full consequences” if it did.
Total said on Friday said it was considering possible investments in semi-autonomous Iraqi Kurdistan, which is locked in a long-standing feud with the central government in Baghdad over who controls the OPEC country’s oil rights and territories.
Exxon Mobil became the first oil major to sign up with Iraqi Kurdistan late last year, prompting Baghdad to reject that deal as illegal and threaten to end Exxon’s contract for the West Qurna-1 oilfield in the south of the country.
“The position of the Iraqi government will be the same as with the other oil companies, that no company has a right to sign a contract without the approval of the central government of Iraq,” Shahristani told Reuters when asked about a possible Total deal with Kurdistan.
“Any such contract has no standing with the Iraqi government, and the companies have no right to work on the Iraqi territories and they bear the full consequences.”
Shahristani was speaking after Iraq opened a new Gulf crude export outlet in the southern oil hub of Basra on Sunday, clearing the way for Baghdad to increase exports by around 300,000 barrels per day soon after crude begins loading.
Recovering after years of war and sanctions, Iraq signed deals with major oil companies like Shell, Exxon and BP to develop its southern oilfields.
Exxon has yet to reply to Baghdad over its decision to move into Kurdistan.
But Shahristani said the U.S. major would not be able to participate for now in Iraq’s fourth energy bidding round because of its agreements with Kurdistan, which has its own regional government and military force.
“Exxon was informed about the Iraqi government position clearly and openly. They asked for some time, and we are waiting for their final answer to inform them of our final decision,” Shahristani said.
“But right now they are not qualified to participate in the fourth bidding round,” he said.
Baghdad versus Arbil
Baghdad says the central government has control over the country’s oil reserves, but Kurdistan, which gained its semi-autonomous status in 1991, says it can sign oil deals for fields in its territory.
Iraq’s oil ministry has already excluded U.S. oil company Hess Corp. from the bidding round because of its participation in Kurdistan. But it will be more difficult for Baghdad to challenge a large U.S. major like Exxon, with involvement in huge southern Iraqi oil projects.
Total Chief executive, Christophe de Margerie, said on Friday that the French company would not seek contracts in the Iraqi bidding round because he said the conditions were not very attractive. He said the company was considering Kurdistan deals.
Total has s smaller presence than Exxon in southern Iraq, but is in negotiations to develop gas projects in Missan oilfield. It has a minority share in the Halfaya oilfield.
“If they don’t find it attractive enough, they are most welcome to withdraw from it,” Shahristanti responded when asked about Margerie’s comments.
Shahristani also said his understanding was that Iran would not carry out a threat to close down the Strait of Hormuz because Iranian oil supplies also relied on the shipping lane and closure would not benefit Tehran.
Neighboring Iran has threatened to close the Strait if Western sanctions aimed at shutting down Iran’s nuclear program stop it from selling its oil.
“My understanding is that the Iranians would not close the Strait because they don’t benefit anything from its closure,” he said. “They exporting most of their oil through the Strait of Hormuz, of course it is not to their benefit.”