UPDATE: Exxon Deal Clearly Positive For Kurdish Oil - Gulf Keystone

Exxon Mobil Corp.'s (XOM) controversial deal to explore for oil in Iraq's Kurdish region will undoubtedly change the politics of the industry in a positive way, John Gerstenlauer, chief operating officer for Gulf Keystone Petroleum Ltd. (GKP.LN), said Thursday.

"There is no way that a player the size of Exxon can do what it has done and not change the dynamics," Gerstenlauer said at the Oil Council conference in London. "At the end of the day, it has to be positive for Kurdistan."

Exxon Mobil last week became the first of the major international oil companies to enter Iraqi Kurdistan.

The move has prompted threats from the Baghdad government, which has long said contracts between the Kurdish government and oil companies are invalid, and that ExxonMobil could lose its licenses in southern Iraq if proceeds with the deal.

ExxonMobil's entry into the region shows that the industry has confidence that oil contracts with the Kurdish government will be honored, despite Baghdad's protests, said Gerstenlauer. "It's brought an element of credibility to them," he said.

ExxonMobil's entry, and the prospect that more major oil companies will follow, is also likely to trigger, "a wave of consolidation," Gerstenlauer said.

"If the big boys come in and all [oil license] blocks were taken, they're going to buy stuff," he said. The smaller companies that currently dominate the Kurdish oil sector, "are going to be bought up," he said.

"There's a good chance we'll get bought," he said, adding that Gulf Keystone hasn't yet had discussions with any company that could afford to buy it.

-By James Herron, Dow Jones Newswires; [phone]; [e-mail]