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Chevron Barred from Central, Southern Iraq

Public Policy

The second largest U.S. energy company Chevron Corp. will be barred from contracts in central and southern Iraq because the Californian company bought stakes in two oil-exploration blocks in the Kurdish region of Iraq, an Iraqi oil ministry statement said Tuesday.

Chevron is the second major western oil company to be banned by the central government in Baghdad from any future deals in the country’s lucrative oil and gas sector, following Exxon Mobil Corp. last year.

Chevron last week signed a deal with Indian conglomerate Reliance Industries Ltd. buying the majority stakes in two Kurdish blocks.

The Iraqi government move comes as it struggles to assert its authority over energy deals struck within its borders amid a continued lack of legislation for the sector. The central government in Baghdad considers as invalid any deals signed with the Kurdistan Regional Government, or KRG, which in turn states that all and any deals it has signed comply with the country’s new constitution.

“Chevron is barred from any agreement or contract with the federal ministry of oil and its companies …unless it retreats from the contract it signed in Kurdistan region,” the oil ministry statement said.

Chevron has prequalified to bid for oil licenses in central and southern Iraq, but the oil ministry’s statement said that it has terminated its prequalification.

According to the deal, Chevron would have 80% of the oil licenses in question, known as Rovi and Sarta, joining with OMV Rovi GmbH and OMV Sarta GmbH, which hold the remaining 20%.

Chevron’s move may further escalate already high tensions between Baghdad and Kurdistan. A long-standing dispute over the level of payments from the central government to companies operating in the Kurdish region, for oil they have produced and exported, also remains unresolved.

In April the KRG halted the export of nearly 100,000 barrels a day via a Baghdad pipeline to Turkey arguing that the central government is delaying the payment of some $1.5 billion to contracting companies.

Iraq’s federal deputy prime minister Hussein al-Shahristani said recently that some $8.5 billion was lost because the KRG halted exports for periods in 2010, 2011 and 2012. Mr. Shahristani has called on the government to deduct that money from the national budget allocation to Kurdistan.

Last week, Baghdad accused Turkey and the Kurdish region of engaging in illegal oil trade, arguing that only the central government has the right to control oil exports from Iraq.

Baghdad has already blacklisted companies that maintain deals with the Kurds, excluding them from working elsewhere in Iraq. Among those is New York, N.Y.-based Hess Corp. (HES), which was barred last year from competing in the fourth energy auction. Exxon Mobil was also banned from the same auction.

However, international oil firms are increasingly drawn to the region, as contracts to redevelop old oil fields and explore for new ones in southern Iraq turn out to be less attractive than anticipated.

Kurdistan has signed nearly 50 exploration deals, mostly with second-tier international oil companies or wildcat explorers. Baghdad maintains all these contracts are illegal.


3 Comments on "Chevron Barred from Central, Southern Iraq"

  1. BillT on Wed, 25th Jul 2012 1:27 am 

    Hahahaha. We blew 4,000+ American lives, and about $4 Trillion dollars and now cannot even access Iraq’s oil. While China, who did nothing, can. But then, I see no mention of that uncomfortable fact in this ad by Big Oil.

  2. Arthur on Wed, 25th Jul 2012 8:36 am 

    And what this article also illustrates is the nasty fact that politics in Iraq is entirely driven by ethno-religeous differences. Soon in a street near you, certainly in the US, but also in western European nations like Britain (nation wide ethnic uprising last year that lasted for days), Holland, Belgium and France. Even in Greece, neo-fascists are on the rise, fighting illegal immigrants. Will not be long before the colonels will step in there when in all likelyhood Greece will finally default later this year.

    Soon it will be like the thirties again, with the difference that this time it will not be over in 15 years.

    Post-1945 Western elites have pride themselves with their humanist and anti-racist policies. But these policies were only possible in an economic environment of seemingly permanent economic growth, that could be used to buy off ethnic/religeous differences. Now that the West is going to crash Soviet-style, and the means to buy-off differences soon will be gone, expect ethnic conflict to rear it’s ugly head everywhere.

    The world after 2015, one big flash mob.

  3. BillT on Wed, 25th Jul 2012 10:06 am 

    Arthur, I have to agree with you. So many of the world’s problems have been covered over with growth in living standards in the Western world. Now that that is forever gone, and contraction sets in, the blood will flow. Especially in Western countries where so much was promised and now so little will be given. The Marines are training battalions of soldiers to be police and they will not be in foreign countries. They will be on the streets in the Us. The able and smart are leaving the country by the thousands every year.

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