Baghdad pressed to stop obstructing Kurdistan oil

The British Government waded into the legal battle over control of oil in Kurdistan yesterday, calling on Baghdad to stop obstructing the development of the region's reserves.

The calls came as Baghdad renewed its threat to throw Exxon Mobil out of the country after the US giant reached a deal to explore for oil and gas in the semi-autonomous Kurdistan region.

The Iraq government has insisted that oil contracts signed with the Kurdistan Regional Government (KRG) are illegal. It has frequently threatened to bar any oil company operating in Kurdistan from working elsewhere in Iraq and to eject businesses already working in Iraq if they should sign a deal with the KRG.

On Friday Exxon Mobil became the first company operating in Iraq to challenge Baghdad, when its exploration deal in Kurdistan was first reported, prompting a series of threats by Iraqi politicians to evict it.

The British Government entered the quagmire yesterday when Michael Aron, the British ambassador, called on Iraq to "resolve its differences and reach an agreement over hydrocarbon laws and revenue sharing".

Speaking at the Kurdistan-Iraq Oil & Gas conference in Erbil, Mr Aron said: "The British Government would like a climate where British companies can work in and exploit the opportunities, with the Iraqi government and the KRG, across the whole of Iraq."

Mr Aron spoke after Mowaffaki al Rubaie, a former national security adviser and a member of the Iraqi parliament, warned that the Exxon Mobil deal "will not help the delicate negotiation of hydrocarbon law in Baghdad... We believe the federal government will challenge Exxon Mobil."

If Exxon Mobil goes ahead with its exploration contract in Kurdistan, other big players are expected to rush into the region.

Ashti Hawrami, Kurdistan's minister for natural resources, said: "There will be consolidation through mergers, I suspect. The ball is rolling and we can expect more movements in the near future."