Iraq gov't hopes to end oil dispute with Kurds

The Iraqi government Wednesday hailed the start of oil exports from the self-ruled Kurdish north but stressed that all oil deals signed by the Kurds must be ratified by the Oil Ministry in Baghdad.

The Oil Ministry has long opposed Kurdish deals with foreign oil companies. This month, however, the government approved Kurdish plans to export crude from two oil fields to alleviate the national budget crisis caused by falling oil prices.

The agreement stipulates that revenues will be deposited in a federal account and the Kurds will receive 17 percent, the share allotted to them in the federal budget.

Government spokesman Ali al-Dabbagh described the beginning of exports from Kurdish fields as a "step in the right direction."

"But these contracts need to be ratified by the federal Oil Ministry. Until that time these contracts are not fully legitimate," he told reporters at a joint press conference with Oil Minister Hussain al-Shahristani.

Kurds and the Arab-dominated central government have been at loggerheads over nearly two dozen deals signed by the Kurds after the U.S.-led invasion in 2003.

The Baghdad government maintained those deals were illegal. The Oil Ministry threatened to blacklist the international companies involved.

For his part, al-Shahristani reiterated that the central government will not reimburse the companies for their investment and that the Kurds are the ones who must pay them.

The two fields are Tawke, which is being developed by independent Norwegian oil company DNO and Taq Taq which is being run by the Swiss-Canadian Addax Petroleum Corp. Turkey's Genel Enerji is the partner for both of the two investments.

The two fields are now pumping nearly 100,000 barrels a day and are expected to reach a total capacity of 250,000 barrels per day within a year.

During the news conference, al-Shahristani said his ministry will conclude its first bidding round to develop eight oil and gas fields by the end of this month.

The names of the winners will be announced in a ceremony on June 29-30.

Last year, Iraq pre-qualified 35 oil companies out of the 120 that applied to participate in the bidding round. Topping the list are the world's oil giants: Royal Dutch Shell PLC, BP PLC, ExxonMobil Corp., Chevron Corp. and Total.

Later, six state-run oil companies were added to the list and a British company was dropped since it did not submit the required documents. But only 32 companies, who bought the fields' data packages, will be allowed to take part.

The fields on offer are Kirkuk and Bai Hassan in the country's north and Rumaila, Zubair, West Qurna Stage 1 and the three Missan oil fields in the south. Also on the table are the Akkas gas field in western Iraq and the Mansouria gas field to the country's east.

The companies, which are bidding on 20-year service contracts, would be paid through a flat fee for their services instead of production-sharing contracts. Those are considered more preferable by oil companies because they give them a share of profits and allow them to book reserves.

The joint press conference appeared to be a show of government support for al-Shahristani, who is under fire from Iraqi lawmakers and politicians who believe his policies have failed to boost production and exports.

Some lawmakers have threatened a parliamentary investigation and a possible no-confidence vote.

Al-Shahristani called the criticisms "politically-motivated."

Also Wednesday, Prime Minister Nouri al-Maliki met with Total's CEO, Christophe de Margerie, in Baghdad, a government statement said.

Al-Maliki expressed appreciation for France's "huge efforts in helping Iraq," and expressed Iraq's willingness to boost relations with France in different fields, including oil. He called on French companies to invest in Iraq.

De Margerie said his visit was to renew the commitment of Total and the French government to help Iraq. He added that his company will take part in the first bidding round and will increase cooperation with the Oil Ministry.

The statement didn't mention if specific projects were discussed.

Beside first bidding round, Total is teaming up with Chevron Corp. against Norway's StatoilHydro ASA to develop Nahr bin Umar oil field, a prized field with estimated 6.6 billion barrels of reserves in Basra.

The contract will be for engineering, procurement and construction services. More companies could join the bidding.

Iraq sits on the world's third-largest known oil reserves, with at least 115 billion barrels, and oil revenues account for nearly 95 percent of its budget.

Iraq plans to add 300,000 to 500,000 barrels per day by the end of 2010. Its target over the next four to six years is to reach a production level of 4 million to 4.5 million barrels a day.

Meanwhile, Iraqi cabinet on Tuesday agreed to draft a law allowing the government to allocate $0.50 from each barrel to the province where it has been produced.

The step will be first time in Iraq's history that oil-producing provinces receive money per barrel. The draft needs to be ratified by parliament and the country's three-member presidential council to be a law.