Wednesday, November 17, 2010

White House Warned U.S. Company About Oil Deal With Kurds As Another Signs A New Contract

The Houston-based Marathon Oil signed a deal with the Kurdistan Regional Government (KRG) in October 2010 to develop four oil fields in Irbil province. Marathon is the fourth largest combined petroleum company and fifth largest refiner in the United States. The White House warned the corporation about doing business in Kurdistan just as another U.S. firm inked a deal with the Kurds.

The Obama administration advised Marathon Oil not to invest in the KRG last month. U.S. policy is to tell American companies not to sign petroleum deals with the Kurds because there is no national oil law between them and Baghdad. They told Marathon that they are taking a risk working in Kurdistan without the central government’s okay. The Oil Ministry has called all oil contracts with the KRG illegal.

That apparently didn’t stop Arkansas-based Murphy Oil from finalizing a deal with the KRG as well. On November 4, Murphy Oil said that its subsidiary Murphy Central Dohuk Oil Co. had come to an agreement with the Kurds to explore the Central Dohuk field. They will have a 50% interest in a joint venture with the KRG. They plan to start exploratory work by 2012.

Marathon and Murphy are the seventh and eighth American oil companies to enter Kurdistan. Because Baghdad opposes foreign firms operating in the KRG, and all the work is largely looking for oil deposits rather than actually pumping petroleum, only small to medium-sized companies operate in Kurdistan right now. They are hoping that the Kurds will have enough influence in the new Iraqi government to come to some type of understanding over exports. If that happens businesses could switch to oil production. If not, Marathon and Murphy will spend the next couple years poking around Irbil and Dohuk marking oil fields with little to show for it.

SOURCES

Iraq Business News, “Murphy Oil to Explore in Kurdistan,” 11/5/10

Iraq Oil Report, “US Authorities Advised Marathon Oil Against KRG Deal,” Iraq Business News, 11/3/10

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