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Iraqi Kurdish Leader Says Region Will Hold On To Oil Revenues


An oil refinery in Al-Sulaymaniyah, in Iraq's Kurdish region

An oil refinery in Al-Sulaymaniyah, in Iraq's Kurdish region

BRUSSELS (Reuters) - The president of Iraq's Kurdish region has criticized the central government 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, Masud 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.

"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," Barzani told a news conference.

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 entitled to 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 and Toronto-listed Addax Petroleum 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.

But because of the disagreement over revenue sharing with Baghdad, the Kurdish region is currently not exporting production via the pipeline to Turkey's Ceyhan but instead selling oil into the domestic market.

Heritage Oil, a small exploration and production company partnered with Kurdistan, said last month that nearly all the output from Kurdistan's Taq Taq oil field was being diverted to the local market because of the dispute.

Still, Barzani said total Kurdish output was set to grow 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 even then, he said, the income would not be shared.

For Barzani control over the distribution of oil revenues was key.

"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.

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.
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