UPDATE 1-Kurds step up negotiations with Baghdad on oil, Iraqi budget

Mon Feb 17, 2014 9:52am EST

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(Adds statement from Maliki's office)

By Isabel Coles

ARBIL, Iraq Feb 17 (Reuters) - Iraqi Kurdistan's prime minister and top energy official travelled to Baghdad on Monday to intensify efforts to settle a long-running dispute with the central government over the region's oil exports via a new pipeline to Turkey.

Baghdad has threatened to sue Ankara and slash the autonomous region's share of the national budget if exports go ahead through the pipeline without its consent.

The pipeline was completed late last year, and oil has since been pumped through it into storage tanks at Turkey's Ceyhan, but exports from the Mediterranean port are on hold to give diplomacy a chance.

Negotiations have carried on for months with little progress.

As Kurdish Prime Minister Nechirvan Barzani and Minister of Natural Resources Ashti Hawrami headed for Baghdad, however, one industry source said he foresaw a breakthrough "in a week or two", adding, "If it takes any longer than that, there is a problem."

Crude from Kurdistan used to reach world markets through Baghdad's infrastructure, but exports via that channel dried up due to a row over payments for oil companies operating in the northern enclave.

Since then, the Kurds have been exporting smaller quantities by truck across the border whilst building the pipeline to Turkey and negotiating a multi-billion dollar energy deal with Ankara.

The landmark deal laid the ground for development of the infrastructure for Kurdistan to export some 2 million barrels per day (bpd) of oil to world markets and at least 10 billion cubic metres per year of gas to Turkey.

A statement issued by the office of Iraqi Prime Minister Nuri al-Maliki stressed "the need to resolve pending issues in the planned meeting between delegations from the (central) government and the region, and to accelerate approving budget."

The sources said there were some technical issues with the pipeline, including air pockets, which have been resolved and that oil was flowing more or less continuously, albeit in small quantities.

The Kurdish pipeline ties into an existing network controlled by Baghdad that links the northern Kirkuk oilfields to Ceyhan. Both are using the same pumping station, which has caused some problems.

The Kurds plan to install their own pumping station, but it has yet to be commissioned and will take several months to put in place, the sources said.

In Istanbul last week, Barzani and Hawrami met Turkish Prime Minister Tayyip Erdogan, who reiterated his commitment to the deal with Kurdistan, according to a statement on the Kurdistan Regional Government's website. (Additional reporting by Ahmed Rasheed in Baghdad; Editing by Jane Baird and David Evans)

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