UPDATE 2-Kurds say Iraqi oilfield auction is being rushed

Thu Dec 10, 2009 1:51pm EST

Related Topics

* Iraqi Kurds say Baghdad's oil auctions are premature * Government must first pass oil law, resolve Kurdish claims * Kurds want role in talks with oil firms over disputed fields

(Adds quotes, details, background)

By Ayla Jean Yackley

BAGHDAD, Dec 10 (Reuters) - Iraq's Arab-led government is rushing for political reasons to auction oilfields and should first resolve disputes with Kurds and pass modern hydrocarbon laws, Iraqi Kurdistan's top energy official said on Thursday.

Kurdish authorities must be included in any talks that Baghdad conducts with international oil companies on fields that are in disputed areas, Ashti Hawrami, the semi-autonomous region's natural resources minister, said in an interview.

The central government is offering contracts to develop 10 untapped oilfields on Friday and Saturday that, combined, could double oil output from 2.5 million barrels per day (bpd) in Iraq, which sits on the world's third-largest reserves.

"Anything that is rushed in this manner is not in the interests of Iraq. It's rushed for political purposes," Hawrami said, speaking by telephone.

Hawrami said he was unable to specify whether any of the fields being offered this weekend were on contested land because he had been excluded from the tender process.

The auction, Iraq's second since the U.S.-led invasion in 2003, includes the so-called Eastern Fields, located in the volatile Diyala province where certain areas are claimed by both Iraq's majority Arabs and and minority Kurds.

"Any fields that are located in disputed territories, if they are part of any bid round, current or future, then we expect a seat at the negotiating table," Hawrami said. "If we are not involved, the contract cannot be implemented."

Kurds, whose largely autonomous northern region has its own enviable oil wealth, remain at odds with the Arab-led government in Baghdad over land and oil resources. The dispute, analysts say, poses a major threat to Iraq's future stability as U.S. troops prepare to withdraw.

Baghdad says it is the sole authority governing Iraq's vast oil and natural gas reserves, barring foreign energy firms doing business in the Kurdish enclave from its energy auctions.

FAILURE

The total production boost from Iraq's two oilfield auctions could quadruple the national output to more than 10 million bpd.

Hawrami described the June tender as a "fantastic failure." Only BP (BP.L), Europe's second-biggest oil company, won a contract to develop Iraq's super-giant Rumaila field.

Since then, preliminary deals have been reached with Exxon Mobil (XOM.N) and Italy's Eni (ENI.MI) on two other fields.

"Awarding and signing the contract is one thing. Someone being physically willing to invest in the work is another thing," Hawrami said.

He reiterated Kurdish demands that they be included in talks on oilfields near the city of Kirkuk, offered at Iraq's first tender in June. Kurds consider Kirkuk their ancestral homeland.

Negotiations on Kirkuk with Royal Dutch Shell (RDSa.L), Europe's biggest oil company, have been frozen until after the second auction, a senior Oil Ministry official said on Tuesday.

Kurdish authorities will not provide "physical support," including security, to oil companies in disputed areas unless Kurdish authorities have agreed to the deals, Hawrami said.

Kurd-Arab tensions have allowed al Qaeda and other militants to thrive near the border of Iraqi Kurdistan and elsewhere.

The feuding has also blocked passage of energy legislation for years, without which, Kurdish lawmakers argue, the Oil Ministry's deals are legally void.

Hawrami said the next Iraqi government, formed following parliamentary elections on March 7, may be more willing to tackle thorny issues still dividing Kurds and Arabs.

"I think a new political climate will develop after the election and am absolutely hopeful that all of these matters will be dealt with soon," he said. (Editing by Missy Ryan) For more stories on the oil auction, see [ID:nGEE5B71WH]

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