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Iraq oil minister says Kurdish oil could soon flow


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Reuters - Tuesday, December 7

* Kurdish region should turn over oil for export

* Oil minister says Baghdad to pay reasonable costs

By Aseel Kami

BAGHDAD, Dec 6 - A dispute between Iraqi Kurdistan and the central government that halted Kurdish oil exports is "supposed to be resolved" and oil could flow early next year, Iraqi Oil Minister Hussain al-Shahristani said on Monday.

The semi-autonomous northern area has been locked in a dispute with Baghdad that stopped exports last year. The central government deems illegal contracts signed by the Kurdistan Regional Government with foreign companies to develop northern oilfields.

The Kurdish region could produce 150,000 barrels per day next year, Shahristani told reporters in Baghdad when asked if the dispute between the two governments had been resolved.

"It is supposed to be resolved and the region will start handing over the oil at the beginning of next year," he said.

***The minister's comment suggests some movement in the dispute that makes both sides believe Kurdish oil is going to flow soon.

Iraq has signed contracts with foreign oil majors aimed at boosting its output capacity to around 12 million bpd from the current 2.5 million bpd. Output from the Kurdish region will be a key to boosting exports, upon which Iraq relies for about 95 percent of its federal budget.

Baghdad has insisted on controlling Iraq's energy resources, including the oilfields in the Kurdish region. Shahristani has repeatedly said contracts signed by the KRG with foreign firms such as Norway's DNO <DNO.L> are illegal.

But the Kurdish region's oil minister told Reuters on Nov. 25 that his government expected to secure recognition of its oil contracts from a new government in Baghdad, adding he was confident oil would flow from the region by early next year.

Baghdad and Arbil, the Kurdish capital, have longstanding disagreements over land, oil resources, revenue-sharing and reimbursements to foreign operators for expenses.

On Monday Shahristani said Baghdad was "not concerned with the contracts" and that the firms working in Kurdistan should submit receipts for equipment and other reasonable expenses to the central government.

"They will be reviewed. If they are acceptable and reasonable like the rest of the contracts that have been concluded in the rest of Iraq, the costs will be paid to the companies," Shahristani said.


Shahristani also said Iraq had signed contracts to build four new floating ports in the Gulf and that two of them would be ready for service by the end of next year, helping Iraq boost exports. He offered no details.

Global oil companies have reported increases in production at some Iraqi fields already, but analysts have questioned whether Iraq's feeble export infrastructure is up to the task of handling increased output.

"Oil production has started to increase but our export facilities in the Gulf are still below the required level," Shahristani said.

He also said a final deal with Royal Dutch Shell <RDSa.L> and Japan's Mitsubishi <8058.T> to capture flared gas in southern oilfields had not yet been presented to Iraq's cabinet for approval and would not be signed this week.

Under the $12 billion deal, Shell and Mitsubishi will harness associated natural gas being flared at fields including workhorse Rumaila to boost electricity generating capacity. Iraq flares 1 billion cubic feet of gas every day.

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