ExxonMobil, the world's largest oil and gas company, has been excluded from the coming licensing round in Iraq and could lose existing concessions, after it signed oil deals with the Kurdistan Regional Government late last year.
Baghdad plans to auction off 12 exploration blocks next month. Angered by Exxon's refusal to be deterred by a blacklisting policy that bars companies active in the semi-autonomous Kurdish region from participating in licensing rounds in southern Iraq, the government has banned the US super major from its fourth licensing round.
"The Iraqi government has decided that Exxon won't be allowed to participate in the next oil and gas bidding round," a spokesman for Hussain Al Shahristani, Iraq's deputy prime minister for energy, told the Dow Jones news service yesterday.
The government is waiting for a reply to letters warning Exxon that it risks losing its existing contracts in southern Iraq, according to the spokesman, who said that the company's response could decide the outcome.
"We are still waiting for Exxon to answer our letters in which we warned that it has to choose between contracts in Kurdistan and those in southern Iraq," the spokesman said.
The US oil company has a stake in the West Qurna 1 field - the country's second largest - near Basra, where it is producing alongside Royal Dutch Shell, Lukoil and Statoil.
Baghdad does not recognise contracts signed by the Kurdistan Regional Government and fears that giving the Kurds autonomy over the region's energy policy will encourage separatism.
Analysts say the willingness of international oil companies to risk southern concessions is due to the technical service contracts under which they operate. These do not reward the companyies for the risk arising from excessive bureaucracy, contract delays and security concerns.
"The risks need to be factored and costed rightly. Investors of billions of dollars are reluctant to continue to under those conditions," said Luay Al Khatteeb, the executive director of the Iraq Energy Institute.