Norway DNO finds 100 mln barrels of oil in N.Iraq

OSLO, Jun 12 (Reuters) Norwegian independent producer DNO, the first Western oil firm to begin exploration in post-war Iraq, has found at least 100 million barrels of oil in the Kurdish area of northern Iraq, DNO said today.

The Kurdistan regional government called it a ''major discovery'' and said on its Web site that it expected production from the Tawke field near Zaxo to begin in early 2007, in line with earlier statements from DNO.

Developing the oil could lead to a tussle between the regional government and Baghdad as some central government officials have said all oil operations must be under central control, whereas the region wants to control its resources.

''The Tawke discovery is from the first new well drilled in Iraq since Saddam's overthrow,'' the Kurdistan regional government said in a statement dated June 11.

''We anticipate production by early 2007, which will allow for the export of oil along a completely secure route from the one fully secure part of Iraq,'' it said.

DNO's shares leapt on the Oslo bourse by as much as 10 per cent on the announcement before cooling off slightly.

DNO said in a statement: ''Applying a recovery factor of 30 percent, the gross recoverable oil reserves are estimated at 100 million barrels,'' DNO said in a statement.

In addition, oil was found during testing of two deeper reservoir zones, but reserve estimates have not yet been made for those parts of the structure, DNO said.

A maximum flow rate of about 5,000 barrels per day of good quality oil was achieved from one of the shallower oil-bearing reservoirs, DNO said. The preliminary evaluations indicate 375 million barrels of oil in place, it said.

DNO has a 40 percent interest in the field under a production sharing deal with the Kurdistan regional government.

DnB NOR oil analyst Bjoern Inge Toennessen described the size of the find as quite positive, though nothing like the major field in northern Iraq.

''If somebody thought they would announce something like the Kirkuk field, they were way off, but this is a little more than I expected, and I thought the share price would rise more on this news than it has.'' DNO's shares leapt to 59.50 crowns, before easing back to 57.50 crowns by 0905 GMT -- still up 6.5 per cent. That values the company at about 2.11 billion dollars.

OIL SOVEREIGNTY TUSSLE The arrangement between DNO and the regional government had earlier raised objections from some Baghdad officials who had said regional officials did not have authority for such deals.

Iraq's oil minister Hussain al-Shahristani has said that deals struck by regional governments should require approval from the central government and that Iraq needs laws that puts the oil ministry in Baghdad in charge of all oil operations.

Ashti Hawrami, minister of natural resources for the Kurdistan regional government, said in the statement that the Tawke discovery was the result of political and constitutional arrangements giving the people and regional government the power to explore for and develop oil in their region.

''For decades, the people of Kurdistan in Iraq have seen our oil used to finance repression and the physical destruction of our land,'' Hawrami said. ''Now, we control our own resources which we will exploit for the benefit of the people of Kurdistan Region and all Iraqis.'' Hawrami, a former oil industry executive in the UK, said he expected to announce more oil discoveries in the months ahead.

DNO, whose main production operations are in Yemen, said in a separate statement that it would miss its its 2006 production target of 20,000 barrels per day due to lower-than-expected output from its Nabrajah field in Yemen.

''A revised target for the year will be released to the market at a later stage,'' DNO said.

REUTERS SHB HT1617