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No DNO oil export permit, Iraq region says

Oct. 15, 2008 at 7:08 PM

ISTANBUL, Turkey, Oct. 15 (UPI) -- The Iraqi Kurdish region denies reports that Norwegian firm DNO received the OK to begin exporting oil, prompting speculation of a broad political deal.

The Tuesday report pushed DNO shares up 54 percent, though the company says no permit has been granted. United Press International also received numerous phone calls and e-mails attempting to confirm the report, which was not published by UPI.

"When we are ready to export, we will export," the Kurdistan Regional Government's Minister of Natural Resources Ashti Hawrami said Wednesday. Hawrami wants the KRG to produce 1 million barrels per day within five years. The entire country currently pumps 2.4 million bpd, with a negligible amount from the KRG area.

Hawrami refused to respond to the claims, giving only basic details on how the KRG does oil business. He said the way contracts work, the operator must be technically capable of entering Iraq's export routes -- in this case, tying into the northern pipeline to Turkey -- and then apply for a permit.

Export rights also hinge on political progress.

DNO signed a production-sharing contract in 2004 with the Kurdistan Regional Government and more than two dozen with other oil firms since.

Baghdad, however, has maintained the national Oil Ministry reserves the only right to make oil deals.

The DNO contract, however, is likely not past the red line drawn by Oil Minister Hussain al-Shahristani, who told UPI that any oil produced via KRG deals would be confiscated.

DNO and three other contracts were signed prior to a new Iraqi government, creating legal ambiguity, and prior to an agreement between the Kurds and the central government over a new oil law reached in February 2007.

That agreement has been scuttled over disputes as to control over resource development, which has led to stalling of the export green light, UPI is told, despite the ministers' apparent agreement.

"We have told the KRG that we are willing to receive all the oil that's being produced by DNO and others," said Shahristani in a June interview in his Baghdad office. "We told them OK, we'll send a technical team to hook up their pipeline to our export pipeline, and nothing has happened."

Hawrami said earlier this year: "When we are ready, we will call our colleagues, and I don't envisage any problem in that. The metering station is in the KRG territory. We can just link up the pipeline, open the metering and tell (the State Oil Marketing Organization) that so many barrels are going through, please account for it."

Hawrami, when contacted about this week's reports, blasted the reliance on unnamed sources, saying the KRG doesn't issue a response to "somebody making a false claim or starting a rumor."

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Ben Lando, UPI Energy Editor

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(e-mail: blando@upi.com)

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