Iraq's Kurds to hold on to oil revenues -Barzani

* Kurdish president says revenues belong to Kurds

* Iraqi government failed with oil law, Barzani says



By Luke Baker

BRUSSELS, Nov 10 (Reuters) - The president of Iraq's Kurdish region criticised the central government on Tuesday for its failure to draw up a clear law on sharing oil revenues and said the Kurds would hold on to what they earn for now.

Speaking during a visit to the European Parliament, Masoud Barzani said Kurdistan had the right to retain the income from the export of about 100,000 barrels of oil per day, despite a law stating that all Iraq's oil and gas assets are shared.

"The Iraqi oil ministry has failed ... in their laws and therefore we are not obliged to adhere to the oil laws of Iraq because they have failed in producing a much more transparent situation," Barzani told a news conference.

"Eight billion dollars has been used by the Iraqi oil ministry for development of oil production but unfortunately the level of production has dropped. Therefore we have no faith in that law that already exists," he said through a translator.

Iraq's central government and semi-autonomous Kurdistan have since 2004 engaged in a long-running dispute over Iraq's vast oil and gas assets and the growing revenue generated by them. The discord threatens to aggravate the political strains that already exist between autonomy-minded Kurds and Shi'ites.

According to Iraq's constitution, all the country's hydrocarbon assets are shared and there is a formula for distributing the income among regions, with the Kurdish region granted 17 percent of total oil revenues.

But Kurdistan, which occupies the top third of Iraq along the borders with Turkey, Iran and Syria, has been quicker to exploit the oil and gas assets that lie in its territory and is reluctant to give up the revenue they generate.

Foreign investors including Norway's DNO International (DNO.OL) and Toronto-listed Addax Petroleum AXC.TO have helped expand the region's oil production to 100,000 barrels a day, generating potential income of $2.9 billion a year at current oil prices of nearly $80 a barrel. [ID:nLH618048]

Barzani said on Tuesday output could increase tenfold to more than 1 million barrels a day by the end of 2011, bringing forward a previous forecast for that level of output in 2012. But the income would not be shared, he said.

"Until the disputed areas are resolved, we feel that the share of Kurdistan of 17 percent should go to the account of Kurdistan by itself and not be distributed by the finance (ministry) in Baghdad because often they use that as a weapon against us," Barzani said. "We believe it is our right."

While the Kurdish region moved rapidly after the U.S.-led invasion in 2003 to boost oil output, the central government is catching up, signing a series of development contracts with major international oil companies in recent months. [ID:nL3558520]

If all the deals in the pipeline come together in the coming years, Iraq is set to triple its total oil output to 7 million barrels per day, making it the world's largest producer after Russia and Saudi Arabia. (Editing by Anthony Barker)