Norway's DNO revises oil deal with Iraq's Kurdish authorities

Norwegian oil company DNO International said Friday it had revised an agreement with Kurdish authorities on splitting oil production in two licensing areas in northern Iraq.

DNO, the first foreign firm permitted to prospect for oil in Iraq after Saddam Hussein's fall, initially held 55 percent of the production licenses in Erbil and Dohok in Iraq's autonomous Kurdish region.

After revising the contract, the Dohok bloc was split in two parts, with DNO maintaining a 55 percent share of the Tawke oil field but only 40 percent of the remaining Dohok area.

DNO said its Erbil share had also been slimmed down to 40 percent.

"The new terms ... are now in line with recently enacted legislation and we are pleased with the overall terms of the contracts," DNO managing director Helge Eide said in a statement.

The new deal opens the way for DNO, which had previously been forced to sell all oil produced in the licensing areas locally, to export the black gold at a higher price.

The Norwegian company also said it was "encouraged" by initial test production in its Erbil bloc with some 9,000 barrels of oil and 11 million standard cubic feet (more than 311,600 cubic metres) of natural gas per day.

"It is the opinion of DNO that the terms of the ... contracts provide a solid basis for creating substantial values to our shareholders, the region and all of Iraq," the company said.

Its upbeat comments may however be premature in light of an ongoing conflict between the government in Baghdad and authorities in the Kurdish region of the country.

Iraqi Oil Minister Hussein Chahristani said for instance last week that "no oil contracts signed by any regions in Iraq will be recognised by the government of Iraq."

"Companies will not be allowed to work on Iraqi territory unless their contract is approved by the central government in Baghdad," he added.

In November the minister announced he had cancelled around 15 oil contracts signed by the authorities in Iraqi Kurdistan.

Following DNO's announcement on Friday it saw its stock price soar more than 15 percent on the Oslo stock exchange to 7.0 kroner (1.36 dollars, 0.88 euros) a share.