Wednesday, 6 February 2008 | by Randy Fabi

The Kurdistan regional government (KRG) said on Tuesday it will continue to sign contracts with oil companies despite threats from Baghdad to cut exports due to a dispute over their legality.

OIL DEALS: Kurdistan regional government said it would continue to sign contracts with oil companies. (Getty Images)

"We haven't stopped signing [new contracts]," top KRG energy official Ashti Hawrami told reporters after a London oil conference. "We continue to talk to oil companies."

The Iraqi federal government says it halted oil supplies last month to Austria's OMV AG and South Korea's SK Energy in response to what it says are illegal oil exploration deals with Kurdish officials.

Baghdad insists that all oil deals in Iraq must be approved by the central government.

Hawrami said the KRG has not been informed formally of Baghdad's actions, and the KRG hoped it was all just "rhethoric".

"If implemented, I think the only losers are the Iraqis," he said. "Punishing companies is really not the right policy."

"If we have differences between the regional and central governments, we should sort them out ourselves. We should not drag third parties into the discussion," he added.

Hawrami said Baghdad's threats would only deter investment into the country.

The KRG estimated current oil reserves in the Kurdish region at around 20 billion barrels.

With foreign investment, it hoped to sustain an average production of around one million barrels per day (bpd) within five years. (Reuters)