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INTERVIEW-Iraq province takes first steps to energy independence

Ziad al-Sanjary
Wednesday, 23 Oct 2013 | 4:57 AM ET

* Nineveh drafts own rules to lure foreign oil companies

* Seeks investment in oil refinery/oilfield

* Holds initial talks with Exxon, other majors

* Won't be deterred by Baghdad's objections

* Willing to cooperate with Kurdistan on shared blocks

MOSUL, Iraq, Oct 23 (Reuters) - Iraq's northwest Nineveh province has started talks with oil companies and is drafting terms to attract investment in its significant oil and gas reserves, steps certain to antagonise the central government.

Nineveh Governor Atheel Nujaifi says Baghdad has focused on the giant southern oilfields and has paid little attention to developing resources in his province.

"We are not ready to wait for decades until the crude runs out from the south to start energy investment in Nineveh province," he said in an interview.

The governor said he had met with Exxon Mobil and other major oil companies to discuss investment opportunities.

"We listened to their proposals about how to best invest in Nineveh, but we did not sign deals," he said.

Last month the provincial council of the predominantly Sunni Muslim governorate granted him the power to sign deals with foreign oil firms independently of Baghdad, which immediately rejected the move.

Iraq's Shi'ite-led government claims sole authority over the exploration and export of all oil and gas resources.

"The government will not tolerate such a decision, whether from Nineveh or any other province," a senior official said at the time.

That has not deterred Nineveh from following the example of the autonomous Kurdistan region in pursuing an increasingly independent energy policy.

"We will start oil investments in the province with a priority to the downstream industry, and that could be followed by broader investments in the upstream sector," Nujaifi said.

The governor has drafted regulations that could allow foreign investors to bid for an integrated project to build a 150,000 barrels per day (bpd) refinery and develop an oilfield to feed it.

Nujaifi said the province holds around 20 discovered but untapped oilfields and has the potential for huge resources that have yet to be discovered.

"When we have oil majors working, then definitely there will be social benefits, job opportunities and economic gains. Huge investments could create a better, stable environment."

PREPARED TO WORK WITH KURDISTAN

Kurdistan, which borders Nineveh, is embroiled in a long-running dispute with Baghdad over contracts it signed with companies to develop northern fields.

Exxon, the world's largest publicly traded energy company, infuriated Iraq by signing up for six Kurdish exploration blocks in 2011.

Two of those blocks - Bashiqa, seen as the most promising, and al-Qush - lie in areas where Nineveh and Kurdistan both claim jurisdiction.

Nujaifi said Nineveh was prepared to coordinate and cooperate with Kurdistan in managing joint exploration blocks and oilfields to ensure both sides can make gains.

"First we should make clear that both al-Qush and Bashiqa are part of Nineveh province. But we can't do anything about these (Kurdish) contracts; they are irrevocable," he said.

"We are planning to benefit from these deals by getting a share of the revenue from the crude that's produced."

Nujaifi said his province was learning from Kurdistan's journey towards energy independence.

"We should get the benefits of the Kurdish region's experience in energy investment and also follow the same constitutional and legal path the region followed in drawing its energy policy," he said.

Nujaifi said neither the central government nor the oil ministry have the right to stop him from developing the energy resources of the province.

Baghdad has clashed with the governor on several fronts in recent years, including Nujaifi's support for protests by Iraq's Sunni minority against the Shi'ite-led government.

"If the government or the oil ministry object to the province's authorising me and object to our future contracts, then they could go to federal court," the governor said.

A new committee of experts will soon be formed to draft an energy policy for Nineveh, Nujaifi said. It will also prepare the legal and technical ground for forthcoming talks with Kurdish officials.

(Additional reporting by Ahmed Rasheed; Editing by Peg Mackey and Jane Baird)

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