The profile of companies investing in Iraq, both in the Kurdistan Regional Government (KRG) and in federal areas of the country, is set for significant changes in the next few months. In the south, new investors are in talks to take stakes on both the ExxonMobil-led West Qurna-1 field development and the Lukoil-led West Qurna-2 projects. While in the KRG, several large firms are in discussions to invest in the region’s upstream.

But Iraq’s latest political crisis could postpone some of the KRG deals. The Kurdish block talks come amid intense political discussions in the wake of the passage of a 2013 federal Iraqi budget that snubbed the Kurds: giving their oil investors a mere $645mn costs allocation (see p18). The KRG has yet to respond to the budget blow, beyond an official website protest, but the threat to its oil investment is clear. For larger companies prepared to play the waiting game, a stake in the region probably still makes sense. However, companies in talks will be encouraged either to hold off concluding deals or push for easier terms. Of more immediate relevance to the KRG is the fact that the meager budget provision will discourage firms with existing production from making investments to expand capacity. Gulf Keystone’s project to install 20,000 b/d first production at Shaikan is probably too far advanced to retreat now. But, unless resolved, the budget clash will likely prompt Anglo-Turkish firm Genel Energy to postpone a doubling of capacity at Taq Taq to 200,000 b/d and Norway’s DNO to delay pushing capacity at its 80,000 b/d Tawke field to 150,000 b/d. Both expansions were to have been completed by end-2013. (CONTINUED - 825 WORDS)