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UPDATE 3-Iraq, Kurds agree to resume oil exports in Feb

Published 01/18/2011, 01:56 PM

* Exports to start on Feb 1 at 100,000 bpd

* Contracts legality, payments to be discussed later

* Kurdish oil exports held since 2009

(Updates with govt spokesman)

By Shamal Aqrawi

ARBIL, Iraq, Jan 18 (Reuters) - Iraq's semi-autonomous Kurdish region agreed with Baghdad to resume oil exports at the start of February, officials said, taking the two sides closer to resolving bitter disputes over oil and land.

Around 40 companies, such as Norway's DNO, have invested in Kurdistan, but revenues have been curtailed by their inability to sell oil for export, because Baghdad has deemed the contracts they signed unconstitutional.

The news of a possible resumption in exports sent shares of DNO up as much as 6 percent on Tuesday.

Iraqi government spokesman Ali al-Dabbagh told Reuters on Tuesday a deal had been reached with the Kurds to resume exports on Feb. 1, starting at 100,000 barrels per day, but issues like paying the companies were still to be resolved.

The office of the Kurdish prime minister, Barham Salih, said earlier in a statement sent to Reuters the resumption of oil exports from the region was agreed in a meeting on Monday with Iraqi Prime Minister Nuri al-Maliki.

Iraq said last May it had approved a deal with the Kurds and expected Kurdish oil exports to resume quickly. Exports remained blocked, however, while negotiations over forming a new government after a March election continued.

Last year's deal between the central government and the KRG involved the Ministry of Finance in Baghdad paying foreign oil firms operating in Iraqi Kurdistan their expenses but not covering profits.

Dabbagh said all issues related to the Kurdish contracts signed with international oil firms working in the region, and how the companies will be paid, will be discussed later.

"We have agreed... to discuss the issue of the region's contracts at a later stage within the constitutional framework," he said, when asked about the terms of the deal.

The statement from Salih's office said the deal on oil was part of a broader agreement to resolve all outstanding issues between Baghdad and the Kurdistan Regional Government (KRG).

One of the other issues is the inclusion in Iraq's draft budget for 2011 of a clause cutting the funds paid to the KRG if it does not export an average of 150,000 barrels per day this year. The budget has not been approved yet by parliament, and the proposed clause drove Kurdish lawmakers to walk out in protest on its first reading last month.

If oil exports resume from the Kurdish region, flows would be about 100,000 bpd and could reach 250,000 bpd by the end of the year, Kurdish Natural Resources Minister Ashti Hawrami has said.

Kurdish exports from two fields -- Taq Taq and Tawke -- flowed briefly in 2009 but were halted when the Iraqi government refused to pay the oil companies working the fields, including DNO and Turkey's Genel Enerji.

DNO stands ready to export around 50,000 bpd if a deal is concluded. Currently it is confined to selling around 17,000 bpd to the local Kurdish market, where it receives less than half the international price for its oil.

Other companies including London-listed Gulf Keystone, Heritage Oil and Genel have also made large discoveries in the region.

LOGGERHEADS

The Oil Ministry in Baghdad has opposed independent deals signed between the companies and the KRG authorities, considering them illegal.

Iraqi Kurdistan and Baghdad have been at loggerheads over many thorny issues, which U.S. officials fear could be the spark of Iraq's next major conflict just as the sectarian bloodshed fades and as U.S. troops prepare to withdraw this year.

At the heart of the tensions lie disputed territories including the oil city of Kirkuk, which Kurds want to have wrapped into their northern region.

Iraq exports the majority of its oil from its southern fields around the city of Basra at an average of more than 1.5 million bpd now. Oil from the Kirkuk fields provides another 400,000 bpd or so in exports.

Baghdad's hand against the Kurds has been strengthened by a series of oil deals involving fields outside the Kurdish region, which could turn Iraq into one of the world's top crude exporters.

The deals could boost Iraq's output potential to 12 million barrels per day in seven years from around 2.7 million bpd now. (Additional reporting by Ahmed Rasheed in Baghdad; Writing by Rania El Gamal; Editing by Michael Christie and Keiron Henderson)

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