Norwegian company to pump Iraqi oil

The first crude oil pumped by a foreign company in Iraq in decades will flow into the global market next month.

DNO, a Norwegian oil company, will announce on Wednesday that it will begin producing a small amount of oil from the northern Iraqi region of Kurdistan, marking a symbolic return of foreign companies to Iraq after 35 years of state control.

The company’s experience is being closely watched by larger competitors, eager for a slice of the world’s third-largest oil reserves, but deterred by security fears and the lack of a legal framework for Iraqi oil.

But DNO’s announcement could add strain to relations between Iraq’s Kurdish authorities and the central government in Baghdad. DNO’s contract is with the local administration in the relatively peaceful north of Iraq, rather than with Baghdad.

The sharing of oil resources has been a point of dispute between Iraq’s sectarian communities. The Kurdish authorities’ decision to sign separate contracts, which could bring them a direct income source and consolidate their power, has provoked fears of a break-up of Iraq.

DNO’s contract may have to be amended once the country’s hydrocarbons law is finally agreed. Passage of the law – which is critical to attracting foreign investment – through the Iraqi parliament has stalled over control of individual oil fields.

The Norwegian oil company will almost certainly have to deliver early output by truck, because Baghdad has not granted access to the export pipeline.

Helge Eide, DNO’s chief executive, said: “We are ready to pump. We never thought that we would be in a position to start producing oil from Kurdistan only two years after we commenced exploration.”

DNO, which is quoted on the Oslo stock exchange, discovered the Tawke oil field in late 2005, after signing a production sharing agreement in June 2004 with the Kurdish regional government, a semi-autonomous area of northern Iraq.

Ashti Hawrani, the Kurdish oil minister, said Kurdistan’s regional government would share revenue with the rest of the country.

Initial production from the Tawke field is expected to be 15,000 barrels a day. Iraq’s oil output, which was near 3m b/d before the US-led invasion, has dropped to about 2m b/d.