February 7, 2011 / 1:20 PM / in 9 years

UPDATE 2-Iraq still wants Kurd oil deal changes-Shahristani

* Baghdad seeks service contracts in Kurdistan

* Maliki comments reports had sent DNO shares higher

(Adds background, quotes, details, AFP comment)

By Ahmed Rasheed

BAGHDAD, Feb 7 (Reuters) - Iraqi Kurdistan’s production-sharing oil contracts with foreign firms must be turned into service contracts to win approval from Iraq’s central government, Deputy Prime Minister Hussain al-Shahristani said on Monday.

Shahristani, who oversees Iraq’s energy sector, signalled the Baghdad government had not yet mended fences with its semi-autonomous northern region despite comments attributed to Prime Minister Nuri al-Maliki that Iraq would honour the deals.

Shares in Norwegian oil firm DNO, which has invested in Kurdistan, had risen more than five percent on Monday on media reports of Maliki’s comments, as production-sharing deals are generally seen as more favourable to investing companies.

The shares pared gains after Shahristani’s remarks and were up around one percent by 1556 GMT.

The weekend report by news agency AFP seemed to catch senior Iraqi oil officials by surprise.

“In fact this was a misunderstanding and misquoting by the AFP of what the prime minister said,” Shahristani told Reuters. “It did not actually represent the position of the prime minister and the Iraqi government towards this issue.”

“All the contracts we (central government) have signed were service contracts and we expect that all these (Kurdish) production-sharing contracts should be amended to be service contracts in order to be approved” by Baghdad, he said.

Shahristani said the Kurdish contracts had not yet been reviewed by the central government.

Separately, a senior official close to Maliki said Iraq still had to reach agreement with Kurdish officials on the contracts.

“We have not reached a compromise,” said the official, who asked not to be named.


But AFP said it stood by its story.

“Mr. Maliki was not misquoted, and we stand by our story in full. In no part of our interview did Mr. Maliki suggest revising the Kurdish contracts into service agreements,” said Sammy Ketz, AFP’s Baghdad bureau chief, who did the interview.

Abdul Kareem Luaibi, who replaced Shahristani as oil minister when Iraq’s parliament approved a new government in December, declined comment on Maliki’s statements.

Exports from the semi-autonomous Kurdish region were recently restarted following a 15-month halt over a dispute between the Kurdistan Regional Government and Baghdad, which had declared the Kurdish contracts with foreign companies illegal.

The AFP quoted Maliki on Saturday as saying the oil ministry had accepted the contracts because of differences between the extraction of oil in the Kurdish region and in Basra, Iraq’s major production area in the south.

“There is a need for bigger efforts there, while in Basra it (oil) is closer to the surface. It’s difficult to have service contracts in Kurdistan but it’s normal to have them in southern Iraq,” AFP quoted Maliki as saying.

Kurdish exports from two fields — Taq Taq and Tawke — flowed briefly in 2009 but were halted when the Iraqi government refused to pay oil companies working the fields, including Norway’s DNO and Turkey’s Genel Enerji.

Around 40 companies, including DNO, have invested in Kurdistan, but revenues have been curtailed by their inability to sell oil for export.

Last week, crude started to flow from the Tawke field at about 10,500 barrels per day after the two sides said they had reached a deal, a major step toward resolving fierce disputes between Iraq’s majority Arabs and minority Kurds.

Kurdish prime minister Barham Salih has said he is waiting for Luaibi to visit the region to celebrate the export resumption but so far Luaibi has not made the trip. (Writing by Jim Loney, editing by Anthony Barker)

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