Shell pulls out of Kurdistan oil talks to protect Iraq investments

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, including a potential $17bn natural gas deal.

Over recent days Iraqi government officials have threatened to cancel an oilfield contract with ExxonMobil, after the Financial Times reported that the US company had become the first “supermajor” to conclude exploration contracts with the Kurdistan regional government. Big oil groups are racing to secure supplies in Iraq, which has some of the largest reserves.

The central government in Baghdad is seeking to impose a de facto ban on companies operating in Kurdistan, a semi-autonomous region in northern Iraq. Like Exxon, Shell has oil contracts in the south but had even more to lose as it had also been in talks over a $17bn natural gas deal, according to people familiar with the discussions.

“Baghdad’s real power lies in denying future contracts and Shell still had something else on the table. They still had not signed the southern gas field deal,” said one person familiar with the talks, adding that the long-awaited deal with Baghdad cleared its last big hurdle on Tuesday after it was approved by Iraq’s council of ministries.

Daily production in Iraq has only just returned to 2.8m barrels - the level it was at before the US-led invasion in 2003. Development has been hampered by bureaucracy, security fears and logistical bottlenecks.

Under the terms of the 25-year natural gas deal,

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