Iraq gives Gazprom ultimatum

Iraq gives Gazprom ultimatum

Iraq gives Gazprom ultimatum

A Gazprom employee works on an equipment at a refinery in Moscow. Gazprom’s new investments has irked Baghdad. REUTERS photo

Baghdad has told Russian energy giant Gazprom to either cancel its energy contracts in Iraq’s autonomous Kurdistan Regional Government (KRG) region or abandon its work with the central government, a spokesman said on Nov. 9, Agence France-Presse reported.

The ultimatum is the latest in an long-running row between the KRG in the north and the central government, which regards any contracts signed with the KRG as illegal and has told companies they must choose between work in the northern three-province region and the rest of Iraq.

It came just days after an Iraqi official confirmed U.S. firm ExxonMobil, which was served a similar ultimatum, had informed the federal Oil Ministry that it was looking to sell its stake in a massive oilfield in south Iraq, indicating it was opting for contracts with the KRG instead.

“We told Gazprom to give their response to the Iraqi government – to cancel their contract with Kurdistan or leave Badra,” said Faisal Abdullah, spokesman for Hussein Shahristani, Iraq’s deputy prime minister responsible for energy affairs.

He said Iraq had sent the message on Nov. 1.

“The contract [with the KRG] is not legal,” Abdullah said. “This situation will be the same for all companies who work in Iraq, because any energy contract should be approved by the Cabinet and the Ministry of Oil.” A Gazprom-led consortium won the contract to work on the Badra oil field, which lies southeast of Baghdad on the Iranian border, in a public auction in December 2009.

In August of this year, though, Gazprom also signed two production and exploration contracts with the KRG.

Turkey in particular is experiencing political disputes with the central government, which seem to be reflected in energy ties. Iraq expelled Turkey’s state-controlled TPAO from an exploration deal in the south of the country, an oil ministry official said on Nov. 7. However, Turkish Energy Minister Taner Yıldız confirmed on Nov. 9 that energy ties between the two countries would continue.

Baghdad is also opposing Turkey’s moderate oil purchases directly from the KRG.

While facing problems with its traditional partners, Baghdad is in dire straits to develop its energy fields. Iraq needs up to $1 trillion (784 billion euros) over the next 10 years to rebuild its crumbling infrastructure and battered economy, its investment chief said in an interview on Nov. 8.

Sami al-Araji’s remarks come during the Baghdad International Fair, Iraq’s biggest trade showcase in more than 20 years, as the government looks to court foreign investment, diversify the country’s oil-dependent economy and reduce unemployment.