American forces may have left Iraq over the weekend, but Exxon Mobil is still willing to take risks there. The U.S. oil giant is playing Baghdad off with the semi-autonomous Kurdish Regional Government.
Meanwhile Gulf Keystone Petroleum, a Kurdistan-focused oil exploration firm, on Monday flatly denied being in talks to sell out to Exxon. The rumour mill had the U.S. company improbably offering five times Gulf Keystone's market value. Yet even dismissing the story completely, Exxon has been willing to go out on a limb for Kurdistan's promising oil wealth.
The company's deal with Iraq's Kurds in November to explore six fields in their territory provoked the Baghdad government, which insists it controls all oil contracts in the country. Officials even threatened to strip Exxon of its slice of the 8.7-billion-barrel West Qurna field in the south of the country.
The risk may, however, be worth Exxon's while. By dealing with the Kurds, the company is putting down a marker on the region's oil, whichever part of Iraq's government eventually hands it out. Kurdistan accounts for about a third of Iraq's 143 billion barrels of oil, with much more likely to be discovered. Gulf Keystone, for instance, believes it may be sitting on around 10 billion barrels in its Shaikan field.
And the West Qurna contract isn't exactly a gold mine. The U.S. presence in Iraq rightly didn't favour American firms as they competed with other oil companies from around the world for the same government contracts. These offer only a few dollars profit per barrel of oil. Finding another player to step easily into Exxon's shoes would almost certainly hold up production. Only another super-major, with cheap funds and plenty of resources, could eke out a profit.
So in betting on Kurdistan as well as West Qurna – and on Iraq's security without the Americans – Exxon is taking a bold but not reckless gamble. With such big underdeveloped territories so rare, the spoils are worth it. And being the most valuable publicly traded company on the planet gives Exxon a better chance than most of persuading rival political constituencies that it is too important for Iraq's own oil wealth to be forced out.