Royal Dutch Shell is exploring possibilities in Iraqi Kurdistan, having seen rivals Exxon Mobil and Total risk Baghdad's wrath by moving into the autonomous northern region while developing major oilfields in the south, Reuters has reported, citing industry sources. "Shell is in conversation with the KRG," a source with knowledge of the matter, who asked not to be identified, said. "It could eventually lead to something material in Kurdistan."
Our view:
This would be a big vote of confidence from another supermajor towards Kurdistan, especially after Exxon’s and Total’s move has sparked a heated reaction in Baghdad. (The central government in Baghdad is seeking to impose a de facto ban on companies operating in northern Iraq). We expect a positive market reaction in today’s trading, even tough market has already started pricing in the de-risking of MOL’s position in Kurdistan after the recently intensified corporate activity in the region (most notably Chevron’s and Total’s entry) and the alleged agreement between Erbil and Baghdad.