On Wednesday, the Iraqi government said that Exxon Mobil Corp. (NYSE: XOM) had notified it that the company planned to sell its stake in the West Qurna-1 oil field project. Exxon owns 60% of the field and is its operator. Royal Dutch Shell PLC (NYSE: RDS-A) holds a 15% stake in the field and the Iraqi government holds the rest.
Russia’s Lukoil confirmed this morning that it has received an offer from Exxon, and that the Russian company will consider the stake. Exxon also has reportedly talked with BP PLC (NYSE: BP), Eni SpA (NYSE: E) and China’s CNPC about buying the stake.
Exxon has signed contracts with the Kurdistan Regional Government to develop six projects in Kurdistan, and that has led to friction between the U.S. supermajor and the Iraqi government, which claims it is the sole controller of oil rights in the country. Iraq barred Exxon from bidding on new fields in an April auction as punishment for the company’s agreement with the Kurds.
Under its contract for West Qurna-1, Exxon receives $1.90 per barrel for each barrel it produces above 244,000 barrels a day, the field’s production level when the contract was signed in 2010. The field currently produces about 400,000 barrels a day, and the Iraqis’ ultimate goal calls for 2.85 million barrels a day. No price for Exxon’s stake has been revealed.
It is early days yet in any discussion of a sale, but Exxon apparently has cast its lot with the Kurds, who have offered a production-sharing deal that could be much more lucrative for the company than the per-barrel deal it has with the Iraqi government. Exxon also is betting that the central government will not use force to bring the Kurds to heel. That does not appear to be likely anytime soon, but it may be prudent never to say never when it comes to any issue related to oil.