UPDATE 2-Kurds to export some oil through Iraq pipeline as 'goodwill gesture'

Thu Mar 20, 2014 6:18pm EDT

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(Adds comment from Western official, context)

By Isabel Coles

ARBIL, Iraq, March 20 (Reuters) - Kurdistan will export 100,000 barrels of oil per day through the Iraqi pipeline network from April 1 as a "gesture of goodwill" while negotiations with Baghdad continue, a statement from the region's prime minister said on Thursday.

The initiative marks a breakthrough in months of tortuous negotiations to resolve a dispute between Kurdistan and the Iraqi central government over exports of oil from the autonomous region.

Crude from Kurdistan used to flow through a Baghdad-controlled pipeline to the Turkish port of Ceyhan, but exports via that channel dried up in late 2012 due to a dispute over payments for oil companies operating in the region.

Since then, the Kurds have trucked smaller quantities of oil across the border while building a separate pipeline to Turkey in defiance of Baghdad, which retaliated this year by cutting the region's monthly budget allocation.

"The negotiations with Baghdad on oil export and budgetary matters are ongoing. These negotiations have not yet resulted in any acceptable agreements," read the statement by Prime Minister Nechirvan Barzani.

"As a goodwill gesture the Kurdistan Regional Government (KRG) has offered to make a contribution to Iraqi oil pipeline exports to give the negotiations the maximum chance of success".

A Western official said the Kurds would resume feeding crude into the Baghdad-controlled pipeline, which has repeatedly been sabotaged over the past year and is currently since the beginning of this month.

Meanwhile, more than one million barrels have already been pumped through the new Kurdish pipeline into storage tanks at Ceyhan, but the official said that oil would not be sold until further progress was made in negotiations.

The discussions include proposals for oil revenue to be disbursed to the Kurds automatically, as well as the formation of a new committee to oversee exports, the official said.

For now, the oil will be exported via Iraq's State Oil Marketing Organisation and the revenues deposited in the Development Fund for Iraq account in New York, as before.

The official described the talks as "extremely difficult" and said elections next month had further complicated the picture, but that the new initiative "should help improve the atmosphere overall". (Reporting by Isabel Coles; Editing by Mark Trevelyan and Tom Brown)

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