ERBIL (Kurdistan 24) – Just weeks after Prime Minister Adil Abdul-Mahdi announced that Iraq was close to signing a $53 billion, 30-year energy agreement with Exxon Mobil and PetroChina, Iraqi government officials say that the deal is facing roadblocks as a result of contractual wrangling and security concerns.
The primary business-related issue stems from the way Exxon Mobil has proposed to recoup its development costs, aiming to share oil produced by two fields, something Iraq sees as infringing on state ownership of the nation's oil.
“We told them that we totally reject any production-sharing mechanism as it contradicts government energy policy,” one of the officials told Reuters.
One of the Iraqi negotiators of the deal said Baghdad would not sign anything with the current terms proposed by Exxon.
The deputy oil minister for upstream affairs, Fayadh Nema, however, told Reuters on Wednesday that talks were ongoing and that he expected a deal soon.
The other issue causing a snag in negotiations is security concerns caused by steadily rising tensions between the United States and Iran, as well as Exxon Mobil's response to them.
Following their evacuation nearly a month earlier that was described as a precautionary measure, foreign employees of the US oil giant returned to Iraq’s southern West Qurna 1 oilfield on June 15. The evacuations, announced a month earlier, followed an order by the US State Department for the withdrawal of all non-essential US government employees from its embassy in Baghdad and consulate-general in Erbil.
“Exxon pulled its staff from Iraq in response to regional unrest. The question is how they will run a $53 billion project with constant regional instability,” said an Iraqi oil official who oversees foreign companies’ operations in the south to Reuters.
“They might abandon work again and that will hurt our energy sector.”
Four days after most of the evacuated employees returned, three people were injured when a Katyusha rocket struck the site of the residential and operations headquarters of several major global oil firms, including Exxon Mobil, near Iraq’s southern city of Basra.
With tensions continuing to escalate between Washington and Tehran, most recently in the form of Iran shooting down a US surveillance drone on Thursday, the deal could face continued hurdles.
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When asked to comment on the proposed agreement, Kareem Alewi, a lawmaker connected to the Iranian-backed Badr Organization militia, told Reuters, “The government is under a lot of pressure from the Americans to sign long-term energy and power deals.”
“This,” he said, “is a trick to control our economy.”