A dispute between the Iraqi central government and the semi-autonomous region of Kurdistan over oil is heating up, with Baghdad moving to hinder the ability of the Kurdish authorities to make deals with foreign oil companies.
Iraqi officials on Tuesday said their country's next oil lease auction will restrict companies' ability to sign contracts with Iraq's semi-autonomous northern region of Kurdistan.
The Iraqi Oil Ministry inserted a clause that gave ministers the authority to cancel any contracts with foreign oil companies if they sign a deal with the Kurdish regional government, or other local entities, without prior approval, reported Dow Jones.
We decided to include an obligation on the side of the companies...not to work in any area of Iraq -- not just the Kurdistan region -- without the approval of the federal government, said Abdul Mahdy al-Ameedi, the head of the Ministry's petroleum contract and licensing directorate, Dow Jones reported.
The auction will take place at the end of the month.
Relations between the governments of Baghdad and of oil-rich Kurdistan, in the north of the country, have been tense in recent months. The Iraqi government has been especially vocal about ontracts U.S. oil company Exxon Mobil signed with Kurdish officials in November of last year.
Baghdad does not recognize contracts signed without its prior approval, and has not been able to reach with Kurdish authorities an agreement that would establish the sharing of oil revenues.
Kurdistan claims roughly 20 percent of the country's oil wealth. Kurdish President Massoud Barzani said in April the crisis is putting the country in a serious crisis.
Exxon Mobil, the Iraqi government asserts, did not seek the approval of the central oil ministry before signing exploration contracts for oil and natural gas. Kurdish officials have maintained the contracts were legal.
Both sides traded blows in early April, accusing each other of deceit and oil smuggling. Exxon Mobil, Iraq has said, made assurances to the country's oil minister that the company will cancel its Kurdish contracts, but Kurdish government officials said the company remains committed to the six exploration contracts it acknowledged it signed in February, after months of silence.
Iraq is opening 29 trillion cubic feet of natural gas and about 10 billion barrels of oil to bids in its upcoming auction. Exxon Mobil is barred from participating because of the contracts it signed with Kurdistan. The company is keeping its activities in the south of the country, where it is lead developer in the West Qurna 1 oil field, one of Iraq's largest.
Iraq has 115 billion barrels of oil in proved reserves, the world's fourth-largest.
Kurdistan has plans to bolster is own production, with oil reserves estimated at 2 billion barrels. The region claims some of Iraq's largest oil fields, near the city of Kirkuk. Iraq has only recently surpassed 3 million barrels a day in production, a level not een in several decades.