Exxon Mobil Corp. (NYSE: XOM) has already been barred from bidding in the next round of permit sales to develop various projects in southern Iraq because of its contract with the government of Kurdistan to develop Kurdish fields. The government of Iraq claims full sovereignty over oil licensing agreements in the country.
Exxon was to declare last week its decision: would it honor its deal with the Kurds or would it cancel the contract in order to continue developing the West Qurna field in conjunction with Royal Dutch Shell plc (NYSE: RDS-A) and to keep its leading role in a massive water injection project? The company has asked for a few more days to consider its options before giving its decision.
What Exxon is undoubtedly weighing is the potential size of the different resources and its own payoff in both cases. The Iraqis are offering a per barrel fee, most likely less than $2/barrel, plus development costs. But the Qurna filed holds 8.7 billion barrels of proved reserves.
The Kurds have agreed to a production sharing contract, which is a far better deal for Exxon because it follows the price of oil, which these days is almost always higher. The Kurds claim a total resource of some 45 billion barrels, but that number hasn’t been confirmed.
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