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UPDATE 2-Iraq in breakthrough to link Kurd oilfields to export

Mon, Nov 24 2008, 18:23 GMT
http://www.afxnews.com

By Shamal Aqrawi

ARBIL, Iraq, Nov 24 (Reuters) - Iraq's oil minister and officials from its largely autonomous Kurdistan region agreed on Monday to link two Kurdish oilfields to the main northern export pipeline to the Turkish port of Ceyhan, the minister said.

"Concerning this issue, we have agreed to prepare and link the pipeline to the Iraqi strategic pipeline, but regarding the exporting process there are still some unresolved points which will be discussed ... in coming days," Oil Minister Hussain al-Shahristani said.

He had been asked by reporters in the Kurdish capital Arbil when the Oil Ministry would grant an export licence for Kurdistan's Tawke oilfield, on which Norwegian firm DNO has the concession, and for its Shiwashuk field.

DNO shares surged on the news and last traded up 18 percent.

Disputes between the Baghdad and the Kurdistan Regional Government (KRG) have held up development of oilfields for export in Kurdistan. DNO pumps oil from Tawke but has not managed to gain a licence to export it.

Without a licence, it has to sell oil on the domestic market at a fraction of the world price.

Analysts said the news was an unexpected breakthrough.

"It's a big step as far as the KRG is concerned," said Muhammad-ali Zainy of the Centre for Global Energy Studies in London.

"It's a surprise given that he (Shahristani) was adamant these contracts were illegal ... We don't know what's going on behind the scenes."

ONGOING DISPUTE

Shahristani was in Arbil for talks with Kurdish officials aimed at resolving the disputes over contracts the KRG signed with foreign oil firms on its own initiative. Baghdad has said such contracts are illegal, without central government consent.

"We have agreed on the principle that oil remains for all Iraqi people," Shahristani said at a joint news conference with KRG Prime Minister Masoud Barzani.

Iraq's cabinet agreed a draft oil law in February last year, but it has failed to get it through parliament partly because of rows between the KRG and Baghdad over control of oil contracts.

"There are differences not only between the federal government and the (Kurdish) region on some articles in this law, but also among various political blocs," Shahristani said.

Iraq has the world's third largest proven reserves at around 115 billion barrels. In the absence of an oil law, Baghdad has been negotiating contracts with oil majors under old laws.

The KRG says the constitution gives it the right to also do deals in its territory, but the dispute has kept the majors away.

"We still believe that all differences can be resolved through dialogue and consultation," Barzani told the joint conference.

Shahristani said a top priority was the development of Kurdistan's Khurmala field to supply an Arbil refinery.

(additional reporting by Barbara Lewis in London; writing by Tim Cocks; editing by James Jukwey) Keywords: IRAQ/KURDS PIPELINE

(tim.cocks@thomsonreuters.com; Reuters Messaging: tim.cocks.reuters.com@reuters.net)

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