Oil from the Kurdish region of Iraq will begin to flow into world markets within a matter of weeks after a landmark agreement between Baghdad and the regional government.

The prospect yesterday of profits from new oil discoveries in Kurdish Iraq pushed up the share prices of independent oil explorers active in the area, including Addax Petroleum, the London-quoted oil explorer, and DNO, the Norwegian company. Kurdish oil exports will increase the pressure on Baghdad to agree deals with multinationals such as BP, Shell and ExxonMobil that have been held up in disputes over the profit share between the Iraqi State and foreign investors.

After years of wrangling, the Iraqi Oil Ministry issued licences yesterday for the export of oil from fields operated by two foreign companies. From June 1, oil from DNO’s Tawke field will flow at a rate of 60,000 barrels per day into Iraq’s northern export pipeline into Turkey. A further 40,000 barrels a day is expected to flow later in June from Taq Taq, operated by Addax. Kurdish oil export volumes will increase later to as much as 250,000 barrels a day when a pipeline spur links the Taq Taq field to the main export line to Turkey.

Political feuding between Kurdish nationalists in Arbil and Iraqi Arabs in Baghdad have dogged efforts by foreign investors to bring the region’s oil to the world market. Latterly, the dispute appears to have centred on the management of oil revenues.

The Kurdish regional government said yesterday that revenues would be held centrally and distributed throughout the country, according to a formula agreed in the Iraqi Constitution.

While the big oil companies waited for Baghdad to agree rules for foreign investment, smaller independent companies flocked to the Kurdish region, attracted by the local authorities’ willingness to do exploration deals on profit-sharing terms.

Yesterday’s approval of oil exports by Baghdad will highlight the slow pace of development in southern Iraq, where foreign investors have been offered “service contracts” to extract oil.

Excitement over Kurdish exports was heightened last week when Heritage Oil, a Canadian company listed in London, said that a well drilled close to Kirkuk indicated a field with potential recoverable reserves of more than one billion barrels.

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