March 25, 2009 / 8:23 AM / 9 years ago

Kurds holding back oil from Iraq network - oil min

* Oil minister says KRG objects to handing over oil

* Says KRG deals involves “fourth or fifth” level firms

BAGHDAD, March 25 (Reuters) - Iraq’s semi-autonomous Kurdish region will not allow oil from its territory to be piped through Iraq’s national oil network, the country’s oil minister said, throwing into doubt exports from the area.

Hussain al-Shahristani said the Kurdish Regional Government (KRG), which controls three provinces in Iraq’s north, would hold back oil because the companies it invited to develop oil in its territory must be rewarded.

Shahristani has rejected deals signed by the KRG and foreign oil firms, saying they were not put to tender to allow competition and they give firms a share of the oil produced, a deal structure the government in Baghdad rejects.

“Work is continuing to connect the (northern oilfields) to the Iraqi network. But there are objections from the KRG to handing over the oil, claiming that companies that developed the oilfields should be rewarded,” Shahristani said in an interview published in Wednesday’s pan-Arab Asharq al-Awsat newspaper.

The KRG could not immediately be reached for comment, but his comments contradict those made late on Tuesday by Kurdish Prime Minister Nechirvan Barzani, who told reporters, “If they (in Baghdad) are ready to accept exporting, we are ready.”

Several oil firms have deals with the KRG, and Norway’s DNO International (DNO.OL) is in the final stages of connecting its Tawke field to the national oil network.

Shahristani’s comments could mean exports are delayed.

In the interview, Shahristani goes on to say the deals between the KRG and oil firms could be reviewed to comply with central government standards, but adds that the firms involved were “fourth or fifth” level companies.

Baghdad and the KRG have been haggling for years over a new oil law that would govern revenue sharing, one of several disputes between the two sides that also include a row over control of the northern oil-rich city of Kirkuk.

Iraq, whose revenues are almost exclusively derived from its vast oil reserves, desperately needs to rehabilitate its dilapidated oil infrastructure and attract foreign investment.

“Shahristani’s policy is a failure and was the reason for the oil industry deterioration. He spent $8 billion to increase Iraqi oil production but the result is production has retreated,” Barzani said on Tuesday.

Earlier this month, KRG Oil Minister Ashti Hawrami warned foreign oil companies against signing deals with Baghdad on fields in territory Kurds claim.

Baghdad has invited international oil companies to bid for contracts on fields including some near the city of Kirkuk. (Writing by Mohammed Abbas: Editing by James Jukwey)

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