Wed Apr 16, 2008 | By Wojciech Moskwa and Joergen Frich
OSLO, April 16 (Reuters) - Shares in Norwegian oil and gas producer DNO (DNO.OL: Quote, Profile, Research) soared on Wednesday on hopes Iraq is close to finalising an oil and gas law for Baghdad to back oil contracts signed by Kurdish authorities.
DNO shares initially jumped by as much as 24 percent on media reports -- later denied by Iraq's oil ministry -- of a completed deal for Baghdad to honour oil contracts signed by the Kurdish regional government.
The shares pared gains to trade up 16.8 percent at 10.20 crowns by 0857 GMT, making it the biggest gainer on the Oslo bourse which was up 1.1 percent.
DNO was the first western oil company to sign production sharing contracts with the regional Kurdistan government after the U.S.-led invasion five years ago. But DNO still needs Baghdad's permission to start exporting its oil from north Iraq.
An Iraqi oil ministry official denied a deal was made. He said he was "astonished" at the reports and added that the Iraqi oil ministry continues to view the contracts signed by the Kurdish regional authorities as "illegal and void."
But Iraq's Prime Minister Nuri al-Maliki said in Brussels that the Gulf state was close to agreeing the final version of the long-delayed oil and gas law, giving some hope to investors betting on DNO quickly winning an export license.
"We don't have any other information other than what's been seen in the media," DNO Chief Executive Helge Eide told Reuters.
Iraq's central government in Baghdad and Kurdish officials were due to resume talks soon to iron out disputes holding up the landmark draft oil law, a deputy speaker of the Iraqi parliament told Reuters on Tuesday.
Up to now, Baghdad has considered oil deals signed by the Kurdish authorities as illegal and said it would bar companies with such contracts from oil deals in the rest of Iraq.
DNO has long maintained that its production deals with Kurdistan are legal under the Iraqi constitution. The Kurdish authorities are negotiating the export licence with Baghdad on behalf of DNO.
"Once the oil law is in place, DNO should be able to export oil through the federal oil pipeline," said Eric Nasby, an analyst at Handelsbanken in Oslo.
"We have not seen any concrete progress, but have assumed it's there. Today's reports can be interpreted in a way that things are happening, even though we have to wait for confirmation," Nasby added.
Eide told Reuters on April 3 that he was "quite confident" of gaining a licence to export Iraqi oil in 2008, enabling it to quadruple production to about 30,000 barrels per day.
DNO now produces about 7,000 bpd from its Tawke oilfield in Kurdistan. It has said it will sell its oil on the local market until it can export its output in pipelines to Turkey, Syria or other routes. (Editing by James Jukwey)