The semi-autonomous Kurdish government has started pumping crude oil from a disputed oil field in northern Iraq to newly built oil refinery, the Kurdistan Regional Government said in a statement posted in its Web site Tuesday.
"Prime Minister Nechirvan Barzani today inaugurated the first dispatch of oil from Khurmala through 40 km of pipeline to a refinery in Erbil," the statement said.
The start of production from Khurmala could further inflame already escalated tension between the Baghdad government and the Kurds over a number of contracts signed by the KRG with foreign companies.
Baghdad says these deals are null and void because they haven't been approved by the central government, while the Kurds say they are in line with the country's new constitution.
The Khurmala oil field, which was awarded to the Kurdistan National Oil Company by the KRG in its 2007 round of license awards, lies in disputed territory, whose status is likely to be the subject of a future referendum.
The federal Iraqi oil ministry in Baghdad signed a contract in 2004 with a consortium led by Avrasya (AVRSY.IS) of Turkey to provide equipment and materials to develop Khurmala, a field near the disputed and oil-rich city of Kirkuk.
However, KRG forces prevented the field from being developed. Sources close to the KRG said KAR, a domestic Kurdish oil company, has started pumping the oil from the field to a newly built refinery near Erbil, the capital of the KRG in northern Iraq.
The Iraqi oil ministry in Baghdad has yet to react to the new Kurdish move.
The refinery's initial capacity is 20,000 barrels a day, which would increase gradually to 75,000 barrels a day, the production capacity of Khurmala when it is developed. The field is currently producing 35,000 barrels a day, an Iraqi oil industry source said.
According to the post-war constitution, the future of these areas, including the oil city of Kirkuk, and whether they remain a part greater Iraq or a part of Kurdistan, is to be determined by a referendum.