Monday, Mar 05, 2007

By Spencer Swartz

OF DOW JONES NEWSWIRES

LONDON (Dow Jones)--Just a week after a pivotal vote moved Iraq's draft oil law closer to final approval, the Kurdish government in Northern Iraq has laid out ambitious plans to develop the region's hydrocarbons with expectations it will sign deals this year with 10 mostly U.S. and European companies.

The Kurdish government is also expected to pass a milestone at the end of this month or early April when the first exports of oil, developed under contract between the Kurdish government and foreign oil companies, are expected to begin to Turkey, Kurdish Regional Government Minister of Natural Resources Ashti Hawrami told Dow Jones Newswires in an interview.

The contracts will be signed with small and big oil producers after Iraq's long-awaited hydrocarbons law becomes final, Hawrami said in a one-hour interview while on a personal visit to the U.K.

Iraq's cabinet approved Feb. 26 a draft oil law that now goes to parliament, which could sign off the legislation by May. A flurry of deal-making between the central government and regional officials and foreign oil companies over Iraq's big oil reserves is expected once the legal infrastructure is in place.

"We have been working on this for quite a long time. We've had very good negotiations with several companies," Hawrami said.

"I believe we will have 10 new companies signed up by the end of 2007. The companies may range from small independents to significantly large companies that are publicly traded," the minister said, declining to specify the companies likely to seal contracts, though he said he hadn't held discussions with any Chinese, Iranian, or Russian companies.

The deals will involve bidding on more than 10 oil blocks, said Hawrami, who began his ministerial position last June.

A separate Kurdish official told Dow Jones that the Korea National Oil Corp. was in a "good position" to win at least one contract to explore for oil and natural gas in the three northern Kurdish provinces of Sulaimaniya, Dohuk, and Erbil, the capital of the semi-autonomous regional government.

The state-run KNOC could also take part in building a refinery to process oil into gasoline and diesel products that are badly needed in the region, the Kurdish official added.

Hawrami said the federal government in Baghdad wouldn't have veto authority over new contracts signed between the Kurdish government and foreign oil companies. "I think it's quite clear in the constitution that they will not have veto power over contracts we sign," he said.

FIRST KURDISH OIL EXPORTS, PRODUCTION TARGETS

Hawrami reiterated that the Kurdish government doesn't expect changes to be required to five existing KRG contracts with foreign oil companies. The KRG agreed to let the contracts be reviewed by an independent panel to ensure they meet all standards set out by Baghdad.

"It's a gesture of goodwill but we don't see any changes being made. These contracts have to be judged with the standards of when they were signed two, three years ago. You have to be fair," he said.

"We want the best deals for the Kurds and for all Iraqis and these contracts do this. The revenues from all our contracts will shared by the Kurds and all Iraqis," the minister said.

Hawrami said the first oil exports - from a KRG contract with Norway's Det Norske Oljeselskap AS (DNO.OS) - is set to begin by the end of March or early April, as scheduled. "This is DNO's call, but I have not been informed of any delays," the minister said.

A DNO spokesman said the company's first oil exports were on course to begin by the end of March. The company expects to initially begin producing around 10,000 barrels a day in the first month, the spokesman said.

Hawrami said the KRG was targeting oil production from the Kurdish region of 200,000 barrels a day in 2008 and a lofty 1 million barrels a day in five years.

"These targets are reasonable and achievable based on what we know" about oil fields in the region and the companies the KRG is speaking to, he said.

Iraq currently produces around 2 million barrels a day, which is below the country's pre-2003 levels of around 2.5 million barrels a day, although analysts believe output could hit 5 million-6 million barrels a day over the next two decades once new investment and infrastructure is in place.

Hawrami wouldn't be drawn on the thorny issue of Kirkuk and how the final status of that northern oil city might affect the development of hydrocarbons in the Kurdish region.

Kirkuk has almost a fifth of Iraq's proven oil reserves, which stand as the third-biggest in the world after Saudi Arabia and Canada, according to the U.S. Energy Information Administration.

A referendum on Kirkuk's final status is scheduled to be held there by the end of 2007, as required by Iraq's constitution, and the Kurdish population is expected to outvote Turkmen and other ethnic groups in the city to make Kirkuk the fourth province of the Kurdish Regional Government.

"All existing fields in Iraq, including Kirkuk, are managed by the Iraq National Oil Company," he said.

Hawrami said the Kurdish government wants to build a 200,000-250,000 barrel-a-day refinery which will also be put up for tender.

A refinery of that size would cost around $3 billion and take at least five years to build. Hawrami said the government may opt initially for the construction of one or two smaller refineries that can be built more quickly. The smaller refineries could range from 25,000 barrels a day to 100,000 barrels a day in size.

Hawrami said the Kurdish government had ended discussions with Lebanese-owned firm, Make Oil Co., to build a refinery. "We had a meeting and that was it."

Hawrami, 58 years old, said he had good working relations with fellow Iraq Oil Minister Hussein al-Shahristani and with many oil companies since his days as chairman and chief executive of UK-based Exploration Consultants, which was bought by consultants RPS Group PLC.

"The minister is a good quality man. We get along well," he said.

While Iraq's cabinet has approved a draft of the oil law, the federal and the Kurdish governments must still agree on the precise mechanisms for distributing oil revenues and allocating oil fields between Baghdad and the Kurdish government, Hawrami said. The two sides have agreed oil revenues will be distributed on the basis of population size.

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

(END) Dow Jones Newswires

05-03-07 1313GMT