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Exxon’s $53b Iraq deal hit by contract snags, Iran tensions

Exxon’s $53b Iraq deal hit by contract snags, Iran tensions

BASRA/BAGHDAD: Just weeks ago, US energy giant ExxonMobil looked poised to move ahead with a $53 billion project to boost Iraq’s oil output at its southern fields, a milestone in the company’s ambitions to expand in the country.

But now a combination of contractual wrangling and security concerns, heightened by escalating tensions between Iraq’s bigger neighbor Iran and the United States, has conspired to hold back a deal, according to Iraqi government officials.

The negotiations have been stymied by terms of the contract that Baghdad objects to, said four Iraqi officials involved in the discussions who spoke to Reuters on condition of anonymity due to the sensitivity of the matter.

The main sticking point, they said, was the means by which Exxon proposed to recoup its development costs, with the company aiming to share the oil produced by two fields – something Iraq opposes, saying it encroaches on state ownership of production.

One of the Iraqi negotiators said Baghdad would not sign anything with the current terms proposed by Exxon.

ExxonMobil declined to comment on the terms of the contract or the negotiations, with a spokeswoman in Texas saying: “As a matter of practice, we don’t comment on commercial discussions.”

The deputy oil minister for upstream affairs, Fayadh Nema, said on Wednesday that talks were ongoing and he expected a deal soon.

The negotiations have also been held up by two separate evacuations of Exxon staff from Iraq, a result of escalating regional tension between the United States and Iran.

The first was in May after hundreds of US embassy staff were sent home over unspecified security threats from Iran, which backs a number of Shi’ite armed groups in Iraq. The second was this week following a rocket attack thought to have targeted the company which local officials blamed on Iran-backed militias.

Tehran has not commented on the attacks, but the evacuations highlighted the persistent instability in Iraq that is hindering business, fueled by the US-Iran tensions.

Iraq one of the only nations in the world to have friendly relations with both Washington and Tehran; the arch-enemies are its two biggest allies and Baghdad is caught in the middle as they vie for influence in the country.

Many Iraqi officials say the stalling of talks with Exxon and disruptions to its staffing point to the limits of American power in Iran’s smaller neighbor, and that US-Iran tensions have led to a series of security incidents including unclaimed attacks on oil tankers in the Gulf.

“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. “They might abandon work again and that will hurt our energy sector.”