Reuters, Monday June 1 2009 * Exports a breakthrough in Kurd-Baghdad dispute * Hopes to hit million bpd within 2-3 years * Oil pumped to the Turkish port of Ceyhan (adds details, background, quotes) By Mohammed Abbas ARBIL, Iraq, June 1 (Reuters) - Iraq's Kurdistan region said on Monday it hoped to be producing 1 million barrels per day of oil within the next 2-3 years, despite discord with the Arab-led government in Baghdad over Iraq's oil wealth. Khalid Salih, a senior Kurdistan Regional Government (KRG) adviser, said ahead of a ceremony to mark the official start of exports from the Kurds' largely autonomous enclave that it hoped to be pumping 250,000 bpd by the middle of next year. Iraq started exporting oil from Kurdistan's Tawke field, in which Norway's DNO International "With the commencement of oil exports ... The Kurdistan region wants to be a leading example in the new Iraq ... to contribute to Iraq's increased oil production. Today, we are proud to be part of this," Salih said. No representatives of Iraq's Shi'ite Arab-led central government were apparent at the ceremony, underscoring Baghdad's still frosty relationship with Kurdistan's leaders, although Iraqi President Jalal Talabani, a Kurd, showed up. The export rate from Tawke is starting at 60,000 bpd. Another 40,000 bpd will be pumped out of the Taq Taq field, developed by Addax Petroleum and Turkey's Genel Enerji, said Genel Chief Executive Mehmed Sepil, adding he expected it to rise to 70,000 bpd within three months. "We also expect peak production ... will be 180,000 barrels per day. We believe we can achieve this in the next 1 and a half years," Sepil said. While allowing the exports, the central government still refuses to recognise the production sharing agreements Kurdish authorities have signed with the oil firms. That has sown doubt about how Addax, DNO and Genel will actually get paid. Salih said he was confident the payments issue would be fixed. "The issue of the payment of the companies will be dealt with through a mechanism ... We are positive, because of our positive contribution, that will be sorted out quite soon." DISPUTE UNRESOLVED Oil Minister Hussain al-Shahristani has said contracts the KRG signed with private companies independently are illegal. Baghdad also insists oil deals with foreign firms should be fixed-fee service contracts. The KRG receives 17 percent of Iraq's total state oil revenues from the national budget.
DNO International Managing Director Helge Eide told Reuters the production sharing deal with the Kurds was a standard one. Standard agreements usually give the authorities 70-90 percent of revenues, he added. That would make it unviable for the Kurds to pay the firms out of their 17 percent budget share of the total revenues. "The two companies have already signed contracts with the Iraqi Kurdistan region and according to our law they were reviewed," said Salih. "The review is ... final." Analysts say the companies are probably prepared for the fact that they may not get everything agreed in their contracts and may have to settle for less from Baghdad. The disagreements over oil contracts are part of a wider dispute between Baghdad and the KRG over land, power and massive oil reserves. U.S. officials see the disagreement as the greatest threat to Iraq's long term stability. But an urgent need for cash has forced both sides to come together and cooperate over a previously intractable standoff. Shahristani has been criticised in the Iraqi parliament for not increasing sluggish oil output, now running at 2.3-2.4 million bpd, below the level it was at before the 2003 U.S. invasion. While it sits on the world's third largest oil reserves, Iraq is struggling to turn around an industry in dire need of investment after decades of sanctions, neglect and war. Kurdish officials estimate there are oil reserves of at least 40-45 billion barrels of crude in the area now recognised as largely autonomous Kurdistan.