Iraq rejects Kurdish oil contract with US oil firm

Iraq rejected Saturday an oil contract signed recently by the Kurdish Regional Government (KRG) and the U.S. oil firm of ExxonMobile. "We deny the reports by some media that the deputy prime minister of energy affairs (Hussein al-Shahristani) has agreed on exploration contract concluded by ExxonMobile, which works in south of Iraq, with Kurdistan region," said a statement released by Shahristani's office. "The Iraqi government will deal with any company that breaks the laws in the same way that it did with companies in the past," the statement said. It said that Iraq's oil ministry has notified the U.S. oil firm with its stance to reject signing such oil deals with the KRG as the federal government is the only party that has the right to sign oil contracts, stressing that all oil deals signed earlier by the KRG are invalid. Early in 2010, the Iraqi oil ministry struck a deal with the ExxonMobile and the Anglo-Dutch firm of Shell to develop the oil production at West Qurna-1, which has oil reserves of 8.5 billion barrels. Earlier, Baghdad signed service contracts to develop a total of 12 oil fields across the country, including ExxonMobile's contract, with the aim of increasing its oil output capacity to three million barrels per day by the end of 2011. However, the Kurdish region has been offering production- sharing contracts, which is more lucrative than the service contracts signed earlier by the Iraqi government in Baghdad. The country depends on oil revenues for nearly 95 percent of its budget. Last year, Iraq announced its proven oil reserves had increased to 143.1 billion barrels, up from the previous estimation of 115 billion barrels.