* Shahristani says sanctions against Exxon to follow soon
* Says US would have asked Exxon to clear deal with Baghdad
* Consultants says Exxon game risky, miscalculation possible
(Adds quotes, background)
By Simon Falush and Carolyn Cohn
LONDON, Nov 22 Iraq said on Tuesday it
would slap sanctions on U.S. oil major Exxon Mobil for
signing a deal with the Kurdish region, which it said came
without any approval from either Baghdad or Washington.
"The Iraqi government is considering sanctions, and will
inform the company before they make a public announcement,"
Deputy Prime Minister for Energy Hussain al-Shahristani told an
industry conference in London.
"The position of the U.S. government has been that they were
unaware of it and if they had been asked, they would have
obliged (Exxon) to get approval of the Iraqi government," he
told the audience packed with hundreds of Western executives and
The comment means Exxon could lose its giant contracts to
develop fields in southern Iraq after agreeing to six
exploration deals with the northern Kurdish region, which is at
loggerheads with the central government in Baghdad over oil and
Exxon has yet to comment on the deal, which some analysts
and industry insiders say could have been a rare miscalculation
by the world's largest publicly traded oil company of political
risks in Iraq.
U.S. State Department has not yet commented on the deal.
"Everyone was keen to see what Shahristani had to say. And
he could not have agreed because fundamentally it would show
Baghdad has lost. If he approved the Kurdish deal others would
rush and sign similar deal and other regions such as Basrah
would ask for more autonomy," said one risk consultant with
clients in Iraq, who asked not to be identified.
"Washington must be furious. What can you say when your own
company goes and destroys stability in Iraq?," he added.
Other industry insiders said they believed Exxon might still
win the risky game.
"I don't think that Iraq has the right to cancel the
existing contract. They can blacklist Exxon from future
contracts, but Exxon probably sees better opportunities in
Kurdistan," said one delegate at the conference.
"Maybe Exxon is just playing the long game. Shahristani is
the most hawkish in the cabinet, so perhaps Exxon is taking the
long view, hoping that he will leave, and that it will get other
contracts later. They see that they can get better terms in
Kurdistan for now," he added.
FEARS OF SANCTIONS
Iraq is one of the world's biggest holder of oil reserves
and presence in the country is key for global majors at a time
when their resources are getting depleted.
Although the country has repeatedly slashed its ambitious
production targets it still plans to more that double its output
over the next decade which would allow it to become the world's
No.3 producer after Russia and Saudi Arabia.
Baghdad has said any oil deals signed with the Kurdish
Regional Government (KRG) are illegal.
"Exxon's interests in Iraq are large and not to be compared
with what was announced from small blocks in the region," Iraqi
Oil Minister Abdul-Kareem Luaibi said last week.
Exxon, with Royal Dutch Shell, has a multi-billion
dollar contract with Iraq's oil ministry to develop the 8.7
billion barrel West Qurna Phase One oilfield in the south, one
of many large contracts Iraq hopes will help rebuild its crude
OPEC member Iraq has signed scores of deals with foreign oil
explorers to develop its oilfields as it recovers from years of
war and sanctions more than eight years after the U.S. invasion
that toppled Saddam Hussein.
But oil majors have until now stayed away from the northern
Kurdish region because of the ongoing dispute with Baghdad over
who controls disputed territories and the region's oil
Industry sources have said Shell as well as U.S. oil major
Chevron and Italy's Eni have all considered
signing similar deals with Kurdistan but changed their mind at
the last minute fearing sanctions from Baghdad.
(Writing by Dmitry Zhdannikov; editing by James Jukwey)