Total extends reach in Kurdish Iraq

The French oil major Total has widened its operations in the Kurdish region of Iraq by becoming the operator of a concession in the autonomous area.

The company bought an 80 per cent stake in the Baranan block, with the Kurdish Regional Government (KRG) holding the remainder, as the presence of oil majors into the Kurdish region continues to grow in spite of Baghdad's objections. Total has held a 35 per cent stake in the Harir and Safen blocks in the region since last June.

"This participation in an operated exploration block was contemplated at the time Total made its move in [Iraqi] Kurdistan during the summer 2012," the company said.

"It was indeed the initial intent from that time that Total should contribute its technical expertise and operational know-how through an active operator role."

The US companies ExxonMobil and Chevron also hold concessions in the KRG, to the anger of the central government.

When Exxon became the first major international oil company to enter the region late in 2011, Baghdad threatened to expel the world's largest oil company from its operations in the supergiant West Qurna-2 field in the south of the country, and Exxon has reportedly put its stake up for sale.

Chevron, which does not operate in the south, has been blacklisted by Baghdad, preventing it from bidding for concessions in Iraq proper.

The central government denies that the KRG has a right to strike contracts with international oil companies, a practice the Kurds say is in accordance with the country's constitution. Baghdad fears that an independent energy policy will encourage Kurdish separatism and lead to a break-up of the country.

Oil companies have been drawn to the KRG by plentiful reserves and more lucrative contracts than the technical service agreements (TSAs) on offer from Baghdad.

"The KRG represents a strong upstream offering in a pretty stable part of the world. Total will not have wanted to miss out with its competitors already there," said Bill Farren-Price, the chief executive of Petroleum Policy Intelligence.

The TSAs for the southern fields have lost much of their appeal as national production targets have been revised, and the development of the reservoirs progressed more slowly then first envisaged.

Companies such as Total and Exxon remain interested in keeping their presence in the south, said Mr Farren-Price.

"Investment in the KRG may not necessarily mean that they lose their southern concessions."