Chevron Corp confirmed on Thursday its purchase of 80 percent of two blocks in Iraq's Kurdistan, where the second-largest U.S. oil company sees "considerable promise" despite active diplomatic disputes over the region.
Chevron, confirming a Reuters report from Wednesday [ID:nL2E8IIA2W], will be following in the footsteps of larger rival Exxon Mobil Corp (XOM.N), whose exploration agreement with the Kurdistan Regional Government is deemed illegal by Baghdad.
The Exxon deal last November marked the first time a major oil company dealt directly with the Kurds in northern Iraq. While Marathon (MRO.N) and Murphy Oil (MUR.N) have exploration deals there too, Exxon has the added complication of a stake in the West Qurna oilfield in the south.
Chevron is purchasing the Sarta and Rovi blocks from India's Reliance Industries Ltd (RELI.NS), where it will be the new partner of Austria's OMV AG (OMVV.VI) - holder of the other 20 percent interest.
"Chevron believes the Kurdistan Region of Iraq holds considerable promise and this investment aligns well with our strategy," a Chevron spokesman said.
Chevron, which was not involved in contracts awarded in Iraq's four licensing rounds, said it would still monitor opportunities in both the north and south of Iraq.
Yet Kurdistan, which has its own government, has regularly clashed with Baghdad over both its oil rights and its autonomy.
So securing interests in both is not clear-cut. Just last month, Iraq asked U.S. President Barack Obama to stop Exxon from exploring in Kurdistan, saying that it could have dire consequences for the country's stability.
As for the Chevron deal with Reliance, which Britain's Sunday Times newspaper said was thought to be worth about $200 million in a report of the talks, it adds a new chapter to the patchy history between the U.S. and Indian energy giants.
Not only did Chevron buy out Reliance's partner in U.S. shale gas, in a 2011 deal that prompted the Indian company to cry foul, but Chevron also once held a 5 percent stake in Reliance's world-leading refinery complex in Jamnagar.