Tuesday, November 14, 2023

ExxonMobil Latest Major Oil Company To Leave Iraq


At the start of November it was announced that ExxonMobil finalized an agreement to exit Iraq. This is the latest major oil corporation to do so because of the country’s difficult business environment.

 

In November ExxonMobil signed a deal to sell its stake in the West Qurna 1 oil field in Basra. The company owns 22.7% shares in the field which will go to the Basra Oil Company. PetroChina will take over as the operator.

 

ExxonMobil originally entered Iraq in 2009 when it won a bid for West Qurna 1. It signed a technical service agreement that favored the Oil Ministry but ExxonMobil like others accepted the terms because Iraq had so much potential after being closed off to the world for a decade due to U.N. sanctions and hoped that it could renegotiate later on. It turned out that Iraq was far more problematic than it conceived.

 

Leaving Iraq was a perfect example of how hard it is to operate in the nation. In January 2022 Baghdad approved ExxonMobil giving up its stake in West Qurna 1 but it took almost two years to be finalized. It was reported the Oil Ministry didn’t want a Chinese company to take over the field because Beijing has been increasing its presence in Iraq’s energy business. Baghdad wanted to find another American company to take ExxonMobil’s place but failed to do so.

 

Before that Iraq agreed to an OPEC+ plan to cut production in an effort to raise prices which hurt ExxonMobil’s profits. In June 2020 Iraq made a deal with oil companies to reduce output. ExxonMobil said it would lower production by 70,000 barrels a day. That came on top of a 50,000 barrels a day reduction in May. This hurt the corporation’s profits which was linked to how much oil it could pump.

 

In 2015 Exxon was in talks with the Oil Ministry over the Southern Iraq Integrated Project that included building storage, pumping and export facilities in Basra. It also involved a sea water plant to pump water into oil wells to maintain pressure so petroleum could be extracted. The discussions went nowhere marking another time Baghdad failed to come through with its promises to upgrade infrastructure that was necessary to expand the oil industry.

 

Originally Iraq seemed like a huge opportunity but it has been nothing but a disappointment for the large energy companies like ExxonMobil. That’s the reason why they are leaving. It also means Baghdad will never realize its hopes to become the largest and most important oil producer in the world. It simply doesn’t have the means to boost its output and exports despite plenty of talk about it. ExxonMobil is a perfect example of the frustration corporations have experienced dealing with the country.

 

SOURCES

 

Al Ansary, Khalid and Ajrash, Kadhim, “Iraq Says It’s Ready to Buy Exxon’s West Qurna-1 Oil Field Stake,” Bloomberg, 6/19/22

- “Iraq Sees Steady Oil Prices and Considers Buying Exxon Stake,” Bloomberg, 5/3/21

 

Argus, “Iraq may take over unwanted West Qurna stakes,” 8/1/21

 

Dourian, Kate, “Despite turbulence, Kurdistan’s IOCs look to raise spending and output,” Iraq Oil Report, 5/27/22

 

Dourian, Kate, Al-Aqily, Ali, Al-Jabibi, Jassim, Porter, Lizzie, “ExxonMobil finalizes deal to exit West Qurna 1,” Iraq Oil Report, 11/10/23

 

Al Mada, “US report: China begins to expand its oil investment in Iraq,” 2/16/23

 

Mohammed, Aref, “Exclusive: Iraq formally asks to buy $350 million Exxon oilfield share,” Reuters, 5/10/21

 

Porter, Lizzie, Al-Aqily, Ali, “Exxon sets deadline to exit West Qurna 1, prompting tough talks with Iraq,” Iraq Oil Report, 4/21/21

 

Porter, Lizzie, Al-Aqily, Ali and Van Heuvelen, Ben, “Iraq rejects Exxon’s proposed West Qurna 1 sale,” Iraq Oil Report, 5/20/21

 

Reuters, “Iraq to acquire Exxon Mobil’s stake in West Qurna oilfield: Minister,” 1/5/22

- “Rocket hits site of foreign oil firms in Iraq’s Basra, two hurt,” 6/18/19

- “UPDATE 1-Iraq agrees with oil companies on deeper output cuts in June- sources,” 6/14/20

 

Reuters, Al Ansary, Kahlid, “Halliburton, Exxon in Talks for Stake in Iraq Oil Field,” Bloomberg, 12/12/21

 

Van Heuvelen, Ben, “Iraq nears massive oil sector deal with Exxon,” Iraq Oil Report, 12/24/18

 

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