October 29, 2007 / 3:07 PM / 11 years ago

Reliance signs northern Iraq oil contract - source

NEW DELHI (Reuters) - Even as Turkish troops mass on the border of northern Iraq, India’s Reliance signed a deal on Monday to explore for oil and gas in Iraq’s Kurdish region, a senior company official said.

Reliance signed the production sharing contract for two exploration blocks with the semi-autonomous Kurdish Regional Government (KRG), the source said.

“To begin with we will be 100 percent stakeholders but later on Iraq can mandate a company to have a stake in the blocks after discovery in line with their new law,” the company official, who declined to be named, said.

“They have been given to us on (a) negotiation basis.”

A KRG government spokesman was not immediately available to respond to enquiries about the deal.

Turkey has massed up to 100,000 troops along the Iraqi border in readiness for a possible large scale incursion to hunt 3,000 guerrillas who use Iraq’s Kurdish region as a base.

But the KRG is moving ahead with plans to attract international energy companies to explore for oil and gas in the region. It aims to boost oil output to 1 million barrels per day (bpd) in about five years from just a few thousand now.

The KRG said earlier this month it had approved four new oil and gas deals but only gave details of two of them. The four deals were expected to attract around $500 million of investment in exploration.

The semi-autonomous KRG has struck five production sharing agreements (PSAs) this year, despite objections from Baghdad. Iraq’s oil minister said last month that oil deals that the KRG had signed since February were illegal.

The KRG rejects Baghdad’s claims that the deals breach the country’s laws. The region’s government is in talks with a number of international and local companies for further upstream and downstream projects, it said earlier this month.

Under the terms of the PSAs, holders would take 15 percent of the profits, while 85 percent would go to Iraq.

Iraq’s cabinet agreed a draft law for dividing the world’s third-largest oil reserves in February, but rows with the KRG as well as objections from some Shi’ite and Sunni Arab politicians have slowed its progress. Frustrated by Baghdad’s delays, KRG approved its own oil law in August.

Reliance Industries Ltd, India’s top private oil explorer, owns exploration blocks in Yemen, Oman, East Timor, Australia and Columbia thorough its subsidiaries.

Additional reporting by Simon Webb in Doha

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