UPDATE 2-Iraq, Turkey discuss long term oil supply deal

(recasts, adds details)

By Simon Webb

DUBAI, Oct 15 (Reuters) - Iraq is in talks for a long-term Kirkuk crude oil supply contract to Turkey, oil industry sources said, as the improved reliability of its northern export pipeline inspires more confidence in increased oil revenues.

The link to to Turkey has been exporting without interruption for two months after repeated sabotage since the U.S.-led invasion of Iraq in March 2003.

If Iraq can maintain the flow from the Kirkuk oilfields then more long-term contracts would follow, oil sources said on Monday. Oil is Iraq's principal source of the hard currency needed to rebuild its shattered economy.

Iraq issued a sales tender for up to 6 million barrels on Sunday for loading by early November. If all the cargoes sail on time, Baghdad will have sold around 18.5 million barrels of Kirkuk oil since late August -- or nearly 300,000 barrels per day (bpd) -- boosting Iraq's total exports by around 20 percent.

Iraq issues tenders to sell oil from the pipeline terminal at Turkey's Mediterranean Ceyhan port, fed by the pipeline, when it cannot guarantee the flow.

Exports through the line remains sporadic, but the volume pumped since late August has already surpassed the total in 2006 of around 9.6 million barrels.

The flow was halted on Monday after another 1.3-1.4 million barrels came through the line at the weekend, a shipping source said. There were about 6.9 million to 7 million barrels in Ceyhan storage tanks, he added.