ExxonMobil has filed an arbitration case against Iraq's state-owned Basra Oil Co., over the US oil major's stalled attempt to sell its stake in the giant West Qurna 1 oil field.
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ExxonMobil, the main operator of the field, had in January entered into an agreement with third parties to sell its 32.7% share, a company spokeswoman told S&P Global Platts, asking not to be named. But Iraq's oil minister Ihsan Ismaael had said May 3 that Iraq was seeking to take over the stake itself, after having previously said that it was in talks with unnamed US energy companies to acquire ExxonMobil's share.
"ExxonMobil has filed for arbitration against the Basra Oil Company relating to the sale of our interest in the West Qurna I field," the spokeswoman said. "We have worked in good faith and in accordance with the contract with the Basra Oil Co. and the government of Iraq to secure their support for the transaction."
Other partners in West Qurna 1 are PetroChina (32.7%), Japan's Itochu (19.6%), Indonesia's Pertamina (10%) and Iraq's Oil Exploration Co. (5%).
The ExxonMobil spokeswoman said that divesting the stake was part of the company's strategy to focus on more cost-efficient assets, particularly in the Americas.
"The sale aligns with ExxonMobil's strategy to focus on advantaged assets with the lowest cost of supply, including developments in Guyana, Brazil and the US Permian Basin," she said. "We are proud of our history in Iraq and our longstanding positive relationships with the Basra Oil Co. and the government of Iraq, and will continue to work closely and constructively to reach an equitable resolution."
In 2010, Iraq awarded the contract to develop West Qurna 1 to ExxonMobil, Shell and Oil Exploration Co., and in 2013 ExxonMobil sold stakes to Pertamina and PetroChina. In 2018, Shell sold its 19.6% stake to Itochu and exited the giant Majnoon oil field.
ExxonMobil's exit from West Qurna 1 may be similar to Shell's 2018 divestment of its stake in Majnoon, whose operations are now managed by Basra Oil Co., Ismaael said May 3.
ExxonMobil's attempt to wind down its stake in West Qurna 1 would follow its divestment this year of its 32% interest in the Baeshiqa license in Iraq's semi-autonomous Kurdistan region.
ExxonMobil is not the only IOC attempting to exit Iraq.
Iraqi authorities refused Russian energy company Lukoil 's request to sell part of its stake in the West Qurna 2 oil project, CEO Vagit Alekperov said July 22, according to the Prime news agency.
"We informed them [of our intention to sell] part of the stake. There are interested parties. So far the ministry has refused this request, because they are satisfied with the company's work in Iraq ," Alekperov said, according to the report.
"Therefore, we are continuing negotiations on improving the economics of West Qurna 2, especially in the Yamama formation," Alekperov added.
Ismaael had said July 4 that Lukoil wanted to quit projects in the country due to the current investment climate and indicated at the time that the Russian company wanted to sell a stake in West Qurna 2, one of Iraq 's biggest oil fields, to Chinese companies.
Ismaael said at the time that BP, which is the main operator of the giant Rumaila field in southern Iraq, also wanted to exit the country.
Iraq plans to boost the production capacity of West Qurna 1 by 40% to more than 700,000 b/d over the next five years, the oil ministry said June 17, as the country seeks to tap one of the world's largest oil fields with expected recoverable reserves of over 20 billion barrels.
Basra Oil Co. had signed a contract with ExxonMobil and Schlumberger to boost the field's production capacity by 200,000 b/d by drilling 96 wells, the oil ministry said at the time.
Currently West Qurna 1 is producing 380,000 b/d out of a production capacity exceeding 500,000 b/d, Karim Hattab, a deputy oil minister, said in the June 17 statement. The field also produces around 150 MMcf/d of associated gas, he added at the time.
International oil companies in Iraq operate some of the country's biggest fields in return for a per barrel fee linked to production.
The terms of the contracts have been a point of contention over the years, although Iraq needs international expertise to run these fields.