http://www.newsnow.co.uk/A/609265392?-12497:3144
Published on Nov 10, 2012 by RussiaToday
FULL STORY http://on.rt.com/v4hvop
The Iraqi Defence Minister has denied that the country has cancelled a major arms deal with Russia. It's in response to the Prime Minister's spokesman who'd earlier said corruption concerns caused the scrapping of a deal sealed only a month ago, to sell Iraq more than 4-billion-dollars' worth of military hardware.
RT talks to government and business consultant, Christoph R. Horstel.
Iraq's strategic effort to become the world's leading oil producer has taken some bad knocks but Russia appears ready to step in.
Published: Nov. 9, 2012 at 1:59 PM
BAGHDAD, Nov. 9 (UPI) -- Iraq's strategic effort to become the world's leading oil producer has taken some bad knocks, with the defection of Exxon Mobil and other majors to independence-minded Kurdistan, and Wednesday's expulsion of Turkey's state oil outfit from an exploration deal.
But Russia seems more than ready to step in and fill the gap in foreign investment that Baghdad needs to rebuild and expand its oil and gas industry on which the country's future depends.
China, eager to add Iraq's oil to its ever-widening network of resource acquisitions in Africa and the Middle East, is also knocking on Baghdad's door to take over production deals awarded largely to Western majors in 2009-10.
Russia signed a landmark $4.2 billion arms deal with Baghdad in October during a visit to Moscow by Iraqi Prime Minister Nouri al-Maliki.
Russian President Vladimir Putin, driving to restore Moscow's influence in a region where the Soviet Union once held immense sway, pressed Maliki to allow greater Russian energy investment in Iraq.
Moscow media report Baghdad is considered inviting Russia's Lukoil and Gazprom Neft to take over Exxon Mobil's majority stake in the giant West Qurna 1 field in the south.
The U.S. company effectively relinquished its stake there when it signed up with the semiautonomous Kurds in October 2011 in a direct challenge to Baghdad's authority.
The Oil Ministry disclosed Wednesday that Exxon has informed the central government it wants to quit the $50 billion West Qurna 1 project in the south and sell its majority stake.
"Exxon's desire to pull out ... reflects the oil majors' growing disenchantment with southern Iraq and their contrasting enthusiasm for Kurdistan which has signed a flurry of landmark deals with Western energy giants," the Financial Times observed.
Lukoil, Russia's second largest oil producer, is developing West Qurna 2 with Iraq's state-run North Oil Co. Lukoil has a 75 percent share.
Gazprom Neft, the oil arm of Russian natural gas giant Gaprom, recently signed two exploration contracts with the Kurdish Regional Government. Gazprom reportedly told the Oil Ministry it had suspended work with the Kurds but it hasn't confirmed that and may be hedging its bets.
On Wednesday, Iraq signed an oil exploration deal with Lukoil and Japan's Inpex covering 2,100 square miles in the southern provinces of Muthana and Dhi Qar. The two agreed to invest $100 million.
So far, the Western exodus from southern Iraq, where two-thirds of the country's oil reserves of 143.1 billion barrels and natural gas holdings of 126 trillion cubic feet are located, has largely benefited Asian oil companies.
Industry sources estimate that by 2020 Chinese companies will account for 2 million barrels a day of Iraq's production, pegged at 3.1 million bpd in September.
Fatih Birol, chief economist of the International Energy Agency, said recently that "a new trade axis is being formed between Baghdad and Beijing."
The IEA predicts Iraqi production could hit 8.3 million bpd by 2035.
This relationship is part of a shift that is tipping the balance of power in the energy world" away from the United States to China, the Financial Times said.
When Exxon defied Baghdad and signed an exploration deal with the Kurds in October 2011, it triggered an exodus of oil majors from southern Iraq to the more liberal regime, and potentially more lucrative contracts, in Erbil, Kurdistan's capital.
These included Total of France and Chevron of the United States.
Royal Dutch Shell dallied with the Kurds for a while but eventually backed off breaking with Baghdad. It continues to operate in the south along with BP and other majors.
However, the disenchantment among the majors who signed fixed-fee, 20-year production agreements with Baghdad underlines how their patience is running thin over inept governance, suffocating bureaucracy and infrastructure delays.
These developments have heightened a long-simmering dispute between Kurdistan and Baghdad over control of oil exploration and production. This rift has immense political ramifications because the Kurds have long sought independence.
Oil exports from their own enclave would give them the economic basis for statehood that could signal the break-up of the federal state that emerged after the 2003 U.S. invasion.
It would also encourage other Iraqi regions unhappy with Baghdad's domination to seek more autonomy.
The most prominent is the Shiite-dominated south where most of Iraq's oil reserves lie -- right next to Iran.
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UPDATE 2-Iraq would favour CNPC, Lukoil bids for Exxon oil stake
Fri, Nov 16 14:11 PM EST
* Iraq says received "positive signals" from CNPC, Lukoil
* Exxon opens virtual data room for West Qurna 1 oilfield
* Company invites bids by Dec. 5
By Ahmed Rasheed
BAGHDAD, Nov 16 (Reuters) - Iraq would favour bids by Russia's Lukoil and China's CNPC if they decided to buy Exxon Mobil's stake in the super-giant West Qurna-1 oilfield, a senior oil ministry official said on Friday.
A sale of the stake to either company would significantly strengthen the position of Russia or China in exploiting Iraq's oil reserves, the world's fourth biggest.
"During two separate meetings with executives from CNPC and Lukoil, Iraq informed the companies that it favours their contribution to purchase Exxon's share in West Qurna-1 oilfield," the official told Reuters.
Baghdad said it had received "positive signals" from both companies that they will consider making an offer for the $50 billion project, which Exxon wants to pull out of to focus on its deal for exploration blocks in Iraq's autonomous Kurdish region.
Exxon riled Baghdad by signing deals last year with the Kurdistan regional government (KRG). Baghdad rejects contracts granted by the KRG as illegal and told Exxon it had to choose between working in southern Iraq or Kurdistan in the north.
The U.S. oil major opted to stick with Kurdistan, where the contracts are seen as more lucrative.
"We have received positive signals from both CNPC and Lukoil that they will consider purchasing Exxon's stake in West Qurna-1," said the official on condition of anonymity.
"Iraq believes that both companies have enough financial resources and the technology to manage the giant oilfield instead of Exxon Mobil," he added.
DATA ROOM OPENED
Exxon has now opened a virtual data room for West Qurna-1 and approached all likely buyers, inviting bids by Dec. 5, two sources said.
Lukoil, Russia's second-largest crude producer which is already developing West Qurna-2, had previously said West Qurna-1 was "too big for it to swallow", but last week said it was looking into the option.
That has prompted some speculation it could team up with another company, possibly CNPC, to develop the field.
A spokesman for Lukoil confirmed the company had received an offer to develop West Qurna 1: "We are studying it," he said, declining to comment on whether a joint venture was on the cards.
Lukoil is trying to offset a production decline at its fields in Russia, where it faces competition from state-backed companies, by acquiring foreign upstream assets.
The company is active in the Middle East, Central Asia, West Africa and Latin America. But Russia's vast Arctic offshore reserves are off-limits for Lukoil due to legal restrictions that limit participation to state-controlled companies.
Two CNPC sources said the company was aware of Exxon's plan to pull out of the West Qurna 1 project, but declined to confirm or deny reports it was thinking of moving into the field.
In general, they said, CNPC is interested in expanding its operations in Iraq and will not entertain any projects in the Kurdish region so as not to jeopardise its existing deals with the federal government.
A spokesman of the state-owned China National Petroleum Corp. declined to comment on its plans.
Earlier this week, Iraq's deputy prime minister for energy, Hussein al-Shahristani, said the government was in advanced talks with potential buyers to take on West Qurna and that there were enough appropriate candidates.
===============
China the frontrunner to buy Exxon out of Iraq oil
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Iraqi workers walk in West Qurna oilfield in Iraq's southern province of Basra November 28, 2010.
Credit: Reuters/Atef Hassan
By Charlie Zhu and Peg Mackey
BEIJING/LONDON | Thu Dec 20, 2012 5:14pm GMT
BEIJING/LONDON (Reuters) - China National Petroleum Corp (CNPC) has emerged as the frontrunner to take over Iraq's West Qurna-1 oilfield from Exxon Mobil, a move that would diminish Western oil influence in Iraq a decade after the U.S.-led invasion.
U.S. oil major Exxon (XOM.N) is giving up its stake in the giant southern oilfield after clashing with the central government in Baghdad over exploration contracts it had signed with the autonomous Kurdistan region in the north.
Iraqi and Chinese
sources said CNPC unit Petrochina (0857.HK) (601857.SS) is negotiating for Exxon's 60 percent in the $50 billion West Qurna-1 project and that there are rival bidders. Royal Dutch Shell is a minority partner.
"CNPC has shown interest; they are there. And from our side, there is no problem with them taking on a bigger position. We are not sensitive about this," a senior Iraqi official said.
"These are service contracts, not production-sharing contracts (which give companies an ownership stake), so it doesn't matter if they have 10 fields or one."
For energy-hungry China, a major buyer of Iraqi crude, access to reserves is a strategic imperative, and Beijing is prepared to accept tougher terms and lower profits than Western oil majors and even Russian firms such as Lukoil (LKOH.MM), which have to answer to shareholders.
Iraq has the world's fourth-largest oil reserves and wants to at least double its production in the next few years and ultimately challenge Russia and Saudi Arabia as the world's biggest oil nation.
China's stealthy advance in Iraq, supported by piles of cash, has already given it a formidable position in prized southern oilfields, and through Chinese oil company Sinopec (0386.HK), its reach has extended into the northern Kurdish region.
By taking on West Qurna-1, Chinese companies would come to dominate Iraq's oilfields with roughly 32 percent of the reserves found in service contracts awarded to foreign companies, up from 21 percent now.
"PetroChina is in talks to buy the stake from ExxonMobil. There are rival bidders," a source familiar with the Chinese company said. "A decision is expected from ExxonMobil soon."
Iraq has already signaled it would favor bids by CNPC and Lukoil if they decided to buy Exxon's stake and that it had received "positive signals" from both companies they would consider making an offer.
But Russia's Lukoil (LKOH.MM) has made no commitment so far. Russia's second-largest crude producer is already developing West Qurna-2.
FEAR OF WAR
Control of oil resources is at the heart of a dispute between Iraq's Arab-led central government and the autonomous region run by ethnic Kurds in the north, which Baghdad accuses of usurping its constitutional right over oil.
Kurdistan has upset Baghdad by signing deals directly with oil majors such as Exxon and Chevron (CVX.N), providing lucrative service contracts and better operating conditions than in Iraq's south.
By turning its focus to Chinese and Russian companies, Baghdad would be extending a push for a more independent foreign policy, which Prime Minister Nuri al-Maliki initiated after the last U.S. troops left the country a year ago.
Exxon's departure would all but wipe out the American presence in Iraq's southern oilfields. Occidental Petroleum (OXY.N) has a small stake in the Zubair oilfield development project.
With oil majors now shifting their focus northward to sign deals with Kurdistan and away from Iraq's southern oilfields, leaders on both sides are warning of the risks that the dispute could slide into an ethnic war.
As tensions rise, industry sources suggest Exxon might have a change of heart and decide to stay in southern Iraq. Earlier this year, Baghdad said it had called on U.S. President Barack Obama to persuade Exxon not to invest in Kurdistan.
"I would be surprised if Exxon actually exits. I'm betting on some twists and turns ahead," said a Western oil executive, who works for a rival. "They might get nervous in the north."
At the heart of the dispute is the oil wealth under the swathe of land know as the "Disputed Territories" along the vague internal border that includes the ethnically mixed city of Kirkuk, known to some as the "Jerusalem of the Kurds".
Baghdad has warned Exxon and other companies that deals struck with Kurdistan are illegal. The Kurds say the constitution's federalism guarantees their right to develop their region's oil resources.
"The government will take all necessary measures to stop Exxon working, especially in the disputed areas. They should know this is a red line they can't cross," one Iraqi oil official said.
"If they think they can do that, then they will face dire consequences. They should expect everything including confiscation of their equipment and face the results of violating the constitution," he added.
U.S. officials and Iraqi President Jalal Talabani have mediated to prevent a confrontation across the line dividing the two regions. Neither Baghdad nor Kurdistan appear to have the appetite for an open conflict that would risk oil exports.
"Fortunately cooler heads have prevailed for now," said a senior oil industry source. "Unfortunately President Talabani may not be around to mediate in the future."
Talabani suffered a stroke earlier this week, and may be unable to return to work for a prolonged period, at a time when tensions between Baghdad and Kurdistan are rising.
(additional reporting and writing by Patrick Markey; Editing by Jane Baird and Alison Birrane)
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LUKoilSays No to Iraq's West Qurna-1 Project
24 December 2012 | Issue 5042
Reuters
LUKoil said Monday that it had decided not to join the development of Iraq's West Qurna-1 oil field, citing high risks, paving the way for Chinese companies to enter the project.
LUKoil oversees the largest share of oil reserves in Iraq among foreign companies and is already involved in the West Qurna-2 project, while company's from China are vying for Iraqi oil.
"We have analyzed all the risks and decided that since we have been implementing such a global project as West Qurna-2 without a partner, we would have taken great risks by entering another big project such as West Qurna-1," Andrei Kuzyayev, head of LUKoil Overseas, told Russian state TV channel Rossia-24.
West Qurna-1 became available for LUKoil and other majors last month when ExxonMobil has informed the Iraqi government it wanted to pull out of the $50 billion project in southern Iraq.
Iraqi and Chinese sources said that CNPC unit Petrochina
is negotiating for Exxon's 60 percent in West Qurna-1 project and that there are rival bidders. Royal Dutch Shell is a minority partner.
For China, a major buyer of Iraqi crude, access to reserves is a strategic imperative, and Beijing is prepared to accept tougher terms and lower profits than those expected by Western oil majors and even Russian firms, which have to answer to shareholders.
Baghdad expects Exxon to complete the sale of its shares in West Qurna-1 by the end of December, and the U.S. company has told Iraq it is already in talks with other oil majors.
The U.S. firm riled the Iraqi central government by signing deals with the regional government of autonomous Kurdistan.
LUKoil has been trying to offset production declines at its brownfields in Russia's west Siberia, which accounted for some 56 percent of its total production last year, by increasing its portfolio of foreign upstream assets.
LUKoil owns 75 percent in West Qurna-2 and has been looking for a partner to replace Statoil, which decided to leave the project earlier this year.
LUKoil declined to name any candidates.
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