Baghdad to make payments to ease Kurd oil conflict

By Ahmed Rasheed

BAGHDAD, Sept 30 (Reuters) - 

Oil payments from Baghdad to Iraq's Kurdish region will be transferred today, Kurdish Energy Minister Ashti Hawrami said on Sunday, offering hope that a long-running conflict between the central government and autonomous region is easing.

Baghdad and Kurdistan agreed earlier this month to draw a line under a dispute over oil payments after the latter pledged to continue exports and Baghdad said it would pay foreign companies working there.

Kurdistan has riled Baghdad by signing deals with foreign oil majors, such as Exxon and Chevron, contracts the central government rejects as illegal.

"Payments will be transferred to the Kurdish regional government today: that's what I've been told in Baghdad today," Hawrami told reporters in the Iraqi capital.

Small oil producers like London-based Genel Energy and DNO of Norway have been in the region for about a decade. Majors including Exxon, Chevron and Total are newer arrivals.

"This is great news. Payments are crucial for us to keep oil flowing," said an official with a company operating in Kurdistan.

The oil contracts row, however, is part of a broader battle between the Baghdad government and Kurdistan over oil rights, territory and regional autonomy that is straining Iraq's uneasy federal union.

Hawrami was in Baghdad for the meeting of a special committee formed earlier this month to try to resolve differences over the country's long-awaited oil and gas law.

Iraqi Oil Minister Abdul-Kareem Luaibi, who also attended, described the talks as "very positive".

More than nine years after the toppling of Saddam Hussein, the OPEC member still has no binding hydrocarbon law. A 2007 draft national oil law that aims to resolve the disputes over crude has been caught up in political infighting.

A draft national oil law that aims to resolve the disputes over crude has been caught up in political infighting for years.

Another member of the committee tasked with forging consensus over the oil and gas law said Sunday's discussions were a small step.

"We don't expect much from this meeting. It's the first meeting for the committee. Building confidence and removing tension is the topic of today's meeting," said Qasim Mohammed, a Kurdish member of the panel.

Luaibi said crude exports would exceed 2.6 million barrels per day (bpd) in September and estimated production at more than 3.3 mln bpd this month.

With the help of foreign firms, Iraq has ambitious plans to boost production capacity beyond 12 million bpd by 2017, but this target has proved unrealistic due to infrastructure bottlenecks and logistical shortcomings.

It is expected to target 8-8.5 million bpd, but some oil analysts and executives see even 6 million bpd by 2017 as stretch for the war-torn country.

Under U.S. and European sanctions on the country over its controversial nuclear program, Iranian output has declined sharply this year, forcing it into third place on OPEC's list of largest oil producers, just behind Iraq.

BBC HARDtalk - Ashti Hawrami - Natural Resources Minister, Kurdistan Regional Government

Iraq says Shell denies oil talks with Kurdistan

(Reuters) -

 Iraq said on Wednesday that Royal Dutch Shell has denied starting talks with Iraqi Kurdistan to sign energy deals with the semi-autonomous region.

Sources told Reuters last week that Shell was exploring possibilities in Iraqi Kurdistan, encouraged by the example of rivals who were risking Baghdad's anger by moving into the northern region while developing oilfields in the south.

"We don't have any discussions with the Kurdish regional government about working in the region," Shell's vice-president Hans Nijkamp told Iraq's Deputy Prime Minister for Energy Hussain al-Shahristani, according to a statement from Shahristani's office.

Shell, contacted by Reuters on Wednesday, said it had no comment on the Iraqi government statement.

"Over time, we want to work in all of Iraq, but for the time being we've got three mega-projects on the go (in southern Iraq)," a spokesman said, repeating a statement made last week.

Competitors Exxon Mobil and Total have gone largely unpunished by Baghdad for their northern forays.

According to Shahristani's statement, Nijkamp described as "inaccurate" recent reports that Shell was preparing to follow suit, and said they had originated outside the company.

The reports drew an angry response from the Iraqi government, which early this week threatened Shell with "serious consequences" if it signed any deal with the Kurdistan Regional Government (KRG), two government sources confirmed.

Shell has come close to securing contracts with the region twice before but pulled back so as not to antagonise the central government in Baghdad, which regards all deals signed by the KRG as illegal.

The Anglo-Dutch major is at work in Iraq's supergiant southern oilfields of Majnoon, where it is the operator, and West Qurna-1, where it is Exxon's junior partner. The company is also in a $17 billion gas joint venture with Iraq.

Exxon Mobil became the first oil major to move into the northern region of Iraq in mid-October when it signed a deal with the KRG. Norway's Statoil is also looking closely at KRG exploration deals, industry sources have said.

The Iraqi central government in Baghdad says any oil operations in Kurdistan should be signed with central government and it blacklisted Chevron Corp, which followed Exxon into Kurdistan this month, over such a deal.

Autonomous since 1991, Kurdistan has its own government and armed forces, but still relies on the central government for its budget drawn from the OPEC nation's oil revenues.

Kurdistan Oil Gross Export Value $30 Billion/Year