Iraq and Kurdistan edge closer to resolution

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The Iraqi government is set to pay foreign oil companies operating in the northern region of Kurdistan as the two sides moved yet another step closer to resolving their fierce oil export dispute.

Oil Ministry spokesman Asim Jihad confirmed at the weekend that Baghdad will pay producers such as DNO International, by way of Kurdistan's Natural Resources Ministry.

The deal is part of a pact made between Iraqi oil minister Abdul Kareem al-Luaibi and Natural Resource Minister Ashti Hawrami last week.

However, no further pay arrangements were disclosed.

Foreign companies operating in the semi-autonomous region are between $400-500 million out of pocket due to unpaid revenue, according to reports.

However, Norwegian giant DNO said it would not start exports from its Kurdish Tawke field until the region and central government have provided further details and said there were still several issues that would need to be agreed upon before normal operations can resume.

The Kurdistan Regional Government (KRG) also confirmed over the weekend that oil exports from the region would resume by February.

The confirmation came less than a week after reports surfaced that Barham Salih, Prime Minister of the (KRG), said crude exports will be back on the menu next month.

Kurdish oil minister Ashti Hawrami said the region could be producing exports of up to 100,000 barrels a day to be increased to 200,000 by the close of 2011.

The agreement, however, requires that Kurdistan pump out an additional 50,000 barrels of crude per day to feed its own refineries and provide energy for the local communities.

This month's developments follow a suspension that ran for almost one-and-a-half years.

Kurdish oil exports began in June 2009 but were halted mere months later after the two factions came to loggerheads over how foreign companies operating in the region should be financially compensated.

Baghdad considered the region's production sharing agreements to be void, preferring a system of technical service contracts.