Thursday, Jul 10, 2008

(MORE TO FOLLOW) Dow Jones Newswires

July 10, 2008 07:49 ET (11:49 GMT)

Thursday, Jul 10, 2008

(MORE TO FOLLOW) Dow Jones Newswires

July 10, 2008 07:49 ET (11:49 GMT)

Thursday, Jul 10, 2008

(MORE TO FOLLOW) Dow Jones Newswires

July 10, 2008 07:50 ET (11:50 GMT)

Thursday, Jul 10, 2008

(MORE TO FOLLOW) Dow Jones Newswires

July 10, 2008 07:50 ET (11:50 GMT)

Thursday, Jul 10, 2008

(MORE TO FOLLOW) Dow Jones Newswires

July 10, 2008 07:51 ET (11:51 GMT)

Thursday, Jul 10, 2008

(MORE TO FOLLOW) Dow Jones Newswires

July 10, 2008 07:51 ET (11:51 GMT)

Thursday, Jul 10, 2008

(MORE TO FOLLOW) Dow Jones Newswires

July 10, 2008 07:51 ET (11:51 GMT)

Thursday, Jul 10, 2008

 
  
   By Spencer Swartz  
   Of DOW JONES NEWSWIRES  
 

LONDON--Iraq's autonomous Kurdish government Thursday warned that it is being excluded from negotiations between the Iraqi government and foreign oil companies on a handful of vaunted service contracts and said any signed deals without its input would violate Iraq's constitution.

The rub of the matter involves two oil fields in Kirkuk and Bai Hasan in northern Iraq that have been disputed for several years by Baghdad and the Kurds, who govern their own affairs in three northern provinces.

Under Iraq's constitution, work at any fields in disputed areas must come through joint cooperation between the Iraqi and Kurdish oil ministries. Kirkuk is one of Iraq's biggest fields.

Kurdish Oil Minister Ashti Hawrami said the Kurds haven't been invited to negotiations on the service contracts and warned that any companies that sign deals involving the Kirkuk and Bai Hasan fields could end up in hot legal water.

The warning could further sour the negotiating environment between Baghdad and the Kurds over Iraq's long-delayed federal hydrocarbons law and erect a stumbling block to efforts by Iraq's oil ministry and big foreign energy companies to sign some of the expected oil service contracts.

Baghdad is hoping to sign a handful of service, or consultant-work, deals to boost Iraq's oil production capacity by 20% to 3 million barrels a day by the end of the year. The deals, which are each expected to fetch around $500 million each, would represent the first major Iraqi contracts with large U.S. and European companies since the 2003 U.S.-led invasion.

"We have not been consulted and we have not been informed about the proposed service contracts either. The (Iraq) Constitution is clear on these issues" that the Kurds and Baghdad must consult one another on matters involving oil fields in disputed territories, Hawrami told Dow Jones Newswires in an interview.

"The (Kurdish Regional) government fully expects to be involved in all contract negotiations that are in the region or territories that (the) KRG has an interest" in, he said.

Hawrami, when asked, said the Iraq oil ministry was violating the country's constitution by not including the Kurdish government in the service agreement negotiations. "Yes, if you put it that way," he said, while adding that the Kurds would "continue our efforts to make sure that the (federal hydrocarbons) law is enacted soon according to the Constitution."

He also said foreign companies would face legal repercussions from the Kurds if they concluded any deal involving oil fields in disputed areas without the Kurds at the bargaining table.

"Yes, if that happens," Hawrami said without elaborating what the precise legal consequences might be. Hawrami said the Kurds wouldn't blacklist any foreign companies from operating in Kurdish territory, adding he believed foreign oil firms may wait to sign deals until after the federal oil law is passed to avoid getting caught in internal disputes.

"We believe the responsible foreign companies take these legal issues seriously, if and when they are made aware of them. We just expect (the companies) to respect the laws of the land," Hawrami said.

Around 20% of Iraq's proven oil reserves, the biggest in the world after Saudi Arabia, Canada, and Iran, are in the north of Iraq near Kirkuk, Mosul and Khanaqin, according to the U.S. Energy Information Administration.

The Kurds passed their own oil last year and signed around 20 production sharing contracts with several smaller foreign companies, greatly irritating many parts of Iraq's federal government.

Royal Dutch Shell PLC (RDSB.LN), which is in talks with Baghdad over a service contract for rehabilitating the giant Kirkuk oil field, said it believes it is following all Iraqi laws.

"We understand that the (technical service contracts), including that for Kirkuk, are being discussed between the parties at (the) central government level and we await their decision," a Shell spokesman said. "We will follow the decision from the central government of Iraq, which includes representatives of the KRG."

A ConocoPhillips (COP) spokeswoman said that as a matter of policy the company doesn't speculate on market rumors and that ConocoPhillips complies with "all applicable laws governing our operations."

Iraq's oil minister wasn't available to comment.

The company is one of the foreign firms competing for a service deal for the Bai Hasan field, people familiar with the matter told Dow Jones Newswires.

Hawrami said he believed the contract model the Kurds have used to sign around 20 production sharing contracts with foreign companies would better maximize Iraqi oil production and tax revenues.

The types of contracts that the Kurds have signed with companies and the extent of the region's powers in governing its natural resources have been big points of disagreements between the Kurds and Baghdad, hobbling passage of the country's oil law.

A recent study commissioned by the Kurds and conducted by the big U.K. law firm Clifford Chance showed that Iraq stood to lose $450 billion in oil revenues if the service contracts being pursued by Baghdad were the basis for deals covering all the oil potential in the Kurdish region, Hawrami said.

The figures from the report assume 30 billion barrels of new oil discovered in Iraq at an average oil price of $100 a barrel.

Hawrami sad he believed Iraq's technical service agreements will be a bad deal for the country and for the foreign companies.

"Major oil companies are not consultants and they should not put themselves in a position that misleads Iraqis, who are promised increased production which the companies are not committing to under the (service) deals," he said.

-By Spencer Swartz, Dow Jones Newswires; +44 (0)207 842 9357; spencer.swartz@dowjones.com

(END) Dow Jones Newswires

July 10, 2008 07:53 ET (11:53 GMT)