Fri Sep 30, 2005


SINGAPORE (Reuters) - Oil exploration deals in northern Iraq will be negotiated with both the central Iraqi and the regional Kurdistan governments, if Iraq's interim constitution is agreed through referendum next month, a senior Kurdish official said on Friday.

But the regional government will have control on production in the region and on exports abroad, Omer Fatah, prime minister of the regional Kurdish government, said at a news briefing after an Iraq-Singapore business forum.

"The approval will be in collaboration with the Iraqi oil ministry," Omer Fatah said.

"So far, all oil resources that Iraq has are under the control of the central government. When the constitution is proclaimed, oil resources in terms of production and exports abroad will be under the control of the regional government."

Division of responsibilities over the oil sector is a major concern for multinationals, which are keen to tap into Iraq's reserves, seen as the world's third largest.

The current wording of the charter leaves the door open to interpretation, competition by various provinces and a weakening of the central government's role in tapping new oil resources, which may jeopardize much-needed investment, analysts have said.

Oil revenues would be redistributed to the whole Iraqi population under the new constitution, Omer Fatah said, but the Kurdish government hopes to see Kirkuk, Iraq's main oil center in the north, and just south of the Kurdish territory, annexed to the regional government.

Iran's northern Kurdish region, also known as Kurdistan, holds some 40 percent of the country's oil reserves and receives 17 percent of the country's budget, Omer Fatah said.

"From our point of view, it is a very small percentage. If Kirkuk is returned to Kurdistan, revenues will be increased to 20-25 percent," Omer Fatah said.

The giant Kirkuk oilfields could be pumping 730,000 barrels per day provided saboteurs can be fended off, but regular attacks on the installations and pipelines has limited production since the U.S-led war on Iraq in 2003.

Iraq has relied chiefly on exports from its southern oilfields ever since, with output from the Basra oilfields seen at between 1.5 and 1.75 million bpd. Oil exports are Iraq's sole independent source of the hard currency needed for rebuilding after crushing sanctions and three wars in the last quarter of a century.

Kurds carved three semi-independent provinces out of northern Iraq after the 1991 Gulf War, sealing it off from the rest of the country under cover of a no-fly zone enforced on Saddam Hussein's air force by U.S. and British warplanes.