UPDATE 2-Iraqi Kurds woo more oil majors in contest with Baghdad

Wed Jan 30, 2013 12:31am IST

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* KRG hopes to announce new oil block deals with majors next month

* No oil exports by truck from Kurdistan for last few weeks

By Julia Payne and Simon Falush

LONDON, Jan 29 (Reuters) - Iraqi Kurdistan said it is negotiating with two or three major international companies to operate oilfields and expects to announce the outcome in about a month, in a move likely to further heighten tensions with Baghdad.

The remarks by Natural Resources Minister Ashti Hawrami on Tuesday highlight the autonomous region's resolve to push ahead with development of its oil resources independently of the Baghdad-based central government.

Kurdistan has upset the central government by signing deals directly with oil majors such as Chevron Corp and Exxon Mobil, providing lucrative production-sharing contracts and better operating conditions than in the south of the country.

Last week Hawrami said Kurdistan, which is in the north of Iraq and has run its own administration and armed forces since 1991, had awarded Chevron a stake in the Qara Dagh oil block.

"We are negotiating with two to three other significant companies. They will hopefully be announced in a month or so," Hawrami told reporters on the sidelines of a conference in London.

He also said Exxon Mobil's contentious deal to operate in the autonomous region was on track.

Baghdad issued Exxon an ultimatum this week, telling the American oil major it must choose between operating in the north or the south, after Exxon's chief executive Rex Tillerson had meetings in both regions.

At stake is Exxon's 60 percent share of the $50 billion West Qurna-1 project in southern Iraq.

"Exxon is business as usual as far as we are concerned," Hawrami said.

Hawrami declined to name the companies with which talks were under way.

Tensions between the northern region and Baghdad are such that late last year they both sent troops to reinforce positions along their disputed internal border.

Hawrami added that no Kurdish oil has left the autonomous region for a while, as Baghdad had reneged on payments that it was expected to make to operators of oilfields.

The Kurdistan Regional Government (KRG) stopped contributing exports to Iraq's pipeline from Kirkuk in the north to the Turkish port of Ceyhan in December.

"Currently nothing is going through the main pipeline, and has (not been) for a while," Hawrami told reporters at a conference in London.

TRUCKING TO RESUME

Exports by truck stopped two or three weeks ago, Hawrami said, but they should resume next week and rise to around 20,000 barrels per day of crude and 10,000-15,000 bpd of condensate initially.

He added that the exports would begin with a limited amount of condensate - a very light oil - and maybe some crude oil as a top-up.

Condensate exports by truck to Turkey began last summer, and hit a high this month, despite the stoppage. Exports of crude oil from the Kurdistan's Taq Taq oilfield started at the beginning of January this year.

"We are working on some procedures to have a clear monitoring and metering system ...at the border before we allow (further exports)."

The central Iraqi government in Baghdad has repeatedly stated that it considers independent exports from the KRG as smuggling.

The KRG views these exports as part of its 17 percent entitlement to consume oil in Iraq and says the central government does not provide the northern region with enough oil products such as motor fuels.

Kurdistan is short of fuels like diesel, but has abundant supply of naphtha, used to blend gasoline and in making plastics, as well as plenty of heavy fuel oil.

Oil production in the Kurdish region is close 400,000 barrels per day (bpd), including about 15,000 bpd of condensate. The Taq Taq field is producing at 130,000 bpd, Tawke at 105,000 bpd and the Khurmala field at around 110,000-115,000 bpd, Hawrami said.

The capacity for oil exports is around 250,000-300,000 bpd, as refinery capacity in Kurdistan is at 100,000-110,000 bpd currently, and Hawrami said it would reach about 150,000 bpd by the year's end.

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