Russia enters ‘Big Game’ on northern Iraq oil pitch

BAGHDAD

Russia’s Putin (R) meets British PM Cameron for ‘judo diplomacy’ in London. REUTERS photo

Middle East subsidiary of Russia’s Gazprom Neft has inked two oil deals with the Kurdistan Regional Government (KRG), becoming the fourth major oil company to enter into agreements with Iraqi Kurds that bypass the central government in Baghdad.

The Arbil administration in the north and the central government are at loggerheads over rights to develop resources. Baghdad wants to manage its energy resources nationwide, but Kurds insist the constitution doesn’t require them to go through Baghdad.

Tens of deals

Since the 2003 U.S.-led invasion, Arbil have signed scores of oil deals with small and mid-sized oil companies. But the entry of the oil majors may be a game changer that could lead to de facto policies the Kurdish side have long sought.

Turkey’s Genel Energy, a multi-national venture trading on the London bourse, is among the large players there. Baghdad is also at odds with Ankara because of Turkey’s direct oil purchases from Arbil.

In a statement issued on Aug. 1, the St. Petersburg-based company said it has acquired a 40 percent share in the 1,780-square-kilometer Garmian block. The Canada-based WesternZagros company will also hold a 40 percent share.

 In the second deal, the company will hold an 80 percent share in the 474-square-kilometer Shakal block. The KRG will hold a 20 percent share in each contract. Both blocks are located in the southeastern part of the region and are expected to hold about 3.6 billion barrels of oil reserves. Gazprom’s up-front payment is to be around $260 million.

“Gazprom Neft considers the territory of the Kurdistan Region of Iraq promising for further geological study and consequent production at the fields,” First Deputy CEO, Vadim Yakovlev said.
With its latest deals, Gazprom has joined France’s Total, U.S. oil majors Chevron Corp. and Exxon Mobil who have already made their own forays into the region.

Iraq’s post-invasion governments have until recently blacklisted energy companies that signed contracts with the Kurdish government to prevent them from working elsewhere in the country or purchase crude oil.

But in the case of Exxon Mobil, the Iraqi government has had a light hand. Baghdad prevented the U.S. company from taking part in Iraq’s fourth energy bidding round in May but has not touched its deal to develop the 8.6 billion West Qurna field near the southern city of Basra along with Royal Dutch Shell.

No moves have been made against Total, which has a share in a consortium led by China’s National Petroleum Corporation to develop the 4.945 billion barrel Halfaya field in the south. Gazprom is developing the 100 million barrel Badra field in central Iraq. Baghdad has so far only blacklisted Chevron, which has no deals with the government.