(Corrects diplomat's name to James Jeffrey from Jeffrey James)
By Peg Mackey and Isabel Coles
LONDON/ARBIL, Iraq Feb 8 Exxon Mobil
has hired a former U.S. ambassador to Iraq as a consultant,
diplomats and industry sources said, as the U.S. major faces a
dilemma over whether to operate in the south of the country or
honor its deals with the autonomous Kurdistan region.
Iraqi Prime Minister Nuri al-Maliki last month made Exxon an
offer in a bid to woo back the company, which had seemed intent
on pulling out of the $50 billion West Qurna 1 oilfield in the
south under the central government's jurisdiction.
The substance of Maliki's offer to Exxon is not known, but
industry sources describe it as substantial and say it is likely
to involve much sweeter contract terms. The condition is that
Exxon quit the northern Kurdish region.
It was unclear whether James Jeffrey was hired specifically
to handle the dilemma and its fallout, but industry sources and
diplomats said it was likely to work in the central government's
"He probably has better relations in Baghdad than in Arbil,"
said a former U.S. diplomat on condition of anonymity.
Since signing for six blocs with the Kurdistan regional
government in 2011, Exxon has put itself on one of Iraq's
deepest faultlines: between the northern enclave and Baghdad,
which says only it has the authority to grant oil contacts and
control crude exports.
The Kurds argue their right to their own oil policy is
enshrined in the country's federal constitution, drawn up
following the U.S.-led invasion of 2003.
Iraqi oil officials and Kurdish politicians have said
publically they are certain Exxon will choose them over the
Baghdad has the advantage of pursuing a goal aligned with
the foreign policy of the United States, which has actively
discouraged the KRG from pursuing its own oil policy, fearing it
will precipitate the break-up of Iraq.
Tensions between Iraqi Kurds and the Shi'ite-led government
are such that both sides deployed their respective armies to
reinforce positions along their disputed internal border last
U.S. officials say the solution lies in a national oil law
that has been caught up for years in a power struggle between
Sunni, Shi'ite and ethnic Kurdish factions, which has
intensified since U.S. troops withdrew in December 2011.
The head of Iraq's parliamentary oil and energy committee
told Reuters in an interview on Thursday that passing
legislation to govern the world's fourth largest oil reserves
was "at the bottom of the government's list."
"Exxon's made some big hires to patch up mistakes, which
could indicate they may be willing to scale down in Kurdistan"
another diplomatic source told Reuters.
As the first major oil company to risk Baghdad's ire by
venturing north, Exxon afforded the Kurds a victory in their
ongoing turf war with the central government.
Although it would be a symbolic blow if Exxon left, the
region is now host to a number of other majors such as Total
, Russia's Gazprom Neft and Chevron Corp
, and is determined to get greater energy autonomy.
(Editing by James Jukwey)