UPDATE 2-Iraq's Tawke output 40,000 bpd, soon 50,000 bpd

* Iraqi Kurdistan ramping up oil production

* Minister condemns recent energy auction

(Adds background, details)

By Missy Ryan

BAGHDAD, July 14 (Reuters) - The Tawke oilfield in Iraqi Kurdistan, developed by Norway's DNO International (DNO.OL), is producing some 40,000 barrels per day and output should reach at least 50,000 within weeks, a top official said on Tuesday.

Kurdistan Natural Resources Minister Ashti Hawrami said production at the northern region's Taq Taq field, jointly developed by Addax Petroleum (AXC.TO) and Turkey's Genel Enerji, was fluctuating from 30,000-40,000 barrels per day (bpd).

Sometimes it dropped up to 10,000 bpd due to pipeline problems he blamed on the state-run North Oil Company.

"They are causing obstacles and problems for oil flowing through the pipeline," he said.

Iraq's central government gave the go-ahead on June 1 for Kurdish oil to be exported through a national pipeline, a step hailed as a potential breakthrough in a long-running feud between the Kurdish government and the Oil Ministry in Baghdad.

Iraq is hoping to boost output, now about 2.5 million bpd, to reverse its oil industry's long decline and to provide resources needed to fund rebuilding and investment after more than six years of war.

But more than a month after Kurdish exports began, it is still unclear how and when foreign firms operating in Kurdistan are to be compensated in the agreements, which Oil Minister Hussain al-Shahristani deems illegal because they were brokered without involvement of the central government.

The payment question, and charges North Oil is hampering Taq Taq's operations, represent just one front in a bitter feud between Kurdish and Arab officials who, six years after a U.S.-led invasion ousted Saddam Hussein, have not yet been able to settle disputes over hydrocarbons and land.

The feud has not only held up passage of national energy legislation but has fed mounting tension in ethnically mixed areas many see as the chief threat to Iraq's fragile security.

BIDDING ROUND

If DNO isn't compensated for oil exports promptly, it could derail its plans for further investment in Iraq and scare off other foreign firms, dashing Kurdish officials' hopes of opening their oil and gas sector quickly.