Royal Dutch Shell has pulled out of oil-development talks with the Kurdistan Regional Government in an effort to protect lucrative investments in southern Iraq, the Financial Times reported on Thursday, citing people familiar with the discussions.
The newspaper did not say what projects Shell had been seeking to invest in.
Up to now, big oil companies like Shell and U.S. rival Exxon Mobil, who have operations in southern Iraq, have been reluctant to enter Kurdistan, a semi-autonomous region in northern Iraq, because the Baghdad government has barred those who invest there from the south.
However, last week the Kurdish government announced it had signed a deal with Exxon, prompting threats from Baghdad that Exxon may lose its licence in the south.
Oil executives say the big companies are waiting to see how the spat plays out before proceeding but that if Exxon is able to keep its operations in the south, while also accessing new reserves in Kurdistan, Shell and others will likely seek to follow.
Executives in the region told Reuters Shell was one of a number of big international oil companies that had held exploratory talks with the Kurdish Regional Government in the past year.
Shell has oil field deals in the south and a $17 billion (10 billion pounds) gas deal with the Iraqi government cleared its last major hurdle on Tuesday after it was approved by Baghdad's council of ministries.
Royal Dutch Shell and the Kurdish Regional Government were not available for immediate comment.
(Reporting by Tom Bergin and Stephen Mangan; Editing by Jodie Ginsberg)