) is deliberating upon an exit from southern Iraq's giant oil
field − West Qurna-1. The U.S. behemoth plans to sell its 60%
stake in the West Qurna-1 project mainly due to anticipated
narrow profits from the planned $50 billion venture.
Located in the south of Iraq, near the city of Basra, the West
Qurna oil field has estimated reserves of 8.7 billion barrels.
Earlier, in 2010, ExxonMobil, along with its minority partner
Royal Dutch Shell Plc
), signed an agreement for the project with a targeted output of
2.825 million barrels per day by 2017.
By the end of 2011, the parties ended up investing just under
$1 billion. Of Iraq's overall production of slightly over 3
million barrels per day, West Qurna-1 currently delivers about
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The slow pace of the project was mainly due to infrastructure
bottlenecks, payment delays and the ongoing political issues.
Other factors like tough terms and conditions accompanied with
weak margins on the country's service fee contracts are also
causes of concern for the foreign operators.
Again, Exxon's participation in West Qurna remains contested as
the Iraqi authority is concerned over the company's venture to
tap reserves in the country's semi-autonomous Kurdistan region.
ExxonMobil turned out to be the first among the oil giants to
gain entry into Kurdistan, after it signed a deal in mid-October
2011 to explore six areas. But the signing of this contract has
annoyed the Baghdad government, which considers the pact as
The Iraqi government maintains its autocratic stand over all
energy deals signed within its borders in spite of an utter lack
of legislation within the sector. The Iraqi government also
considers all deals signed with the Kurdistan Regional Government
(KRG) as unacceptable. On the other hand, KRG states that all
deals it has signed conform to the country's new constitution.
Hence, ExxonMobil is interested in exiting the West Qurna field
and instead head towards Kurdistan. The political imbroglio in
the region has put off the oil major. The company is now focusing
on expanding its footprint in Kurdistan. Drilling operations are
scheduled to commence in a few months.
We maintain our long-term Neutral recommendation on the