TAWKE, Iraq (Reuters) – In this part of Iraq, the hillsides sweat oil. Without any coaxing, the sticky black treasure oozes from the layered rock and gathers in pools that bubble as dissolved gases surface. Gradually, as the crude slips down the hillsides, it solidifies into a grey mass that resembles a hardened lava flow.

It’s a good metaphor for the progress of oil from the semi-autonomous Iraqi region of Kurdistan over the past five years: big on promise, small on delivery.

Last month, after years of wrangling between Kurdistan’s regional capital Erbil and Baghdad over revenues, exports finally started to flow. Foreign investors — among them Russian oligarchs, a British mercenary boss, U.S. politicians, a former diplomat, and funds controlled by the billionaire investor George Soros — who have sunk $5 billion into Kurdistan’s oil fields, hope they will finally begin to enjoy the rewards.

There’s just one problem: Baghdad may have given the green light for exports, but it has yet to agree on how the companies who produce the oil should be paid. This has happened before.

For a few months in 2009, oil companies exported their product without payment. When neither side could agree on the oil companies’ cut, exports were turned off again.

This time, Baghdad says it is prepared to recognise the contracts the regional government has signed with foreign oil companies.

But the central government is sticking to its line that the deals must be rewritten, in a way the companies oppose because it will cut into their profits.

TAWKE, Iraq (Reuters) – In this part of Iraq, the hillsides sweat oil. Without any coaxing, the sticky black treasure oozes from the layered rock and gathers in pools that bubble as dissolved gases surface. Gradually, as the crude slips down the hillsides, it solidifies into a grey mass that resembles a hardened lava flow.

It’s a good metaphor for the progress of oil from the semi-autonomous Iraqi region of Kurdistan over the past five years: big on promise, small on delivery.

Last month, after years of wrangling between Kurdistan’s regional capital Erbil and Baghdad over revenues, exports finally started to flow. Foreign investors — among them Russian oligarchs, a British mercenary boss, U.S. politicians, a former diplomat, and funds controlled by the billionaire investor George Soros — who have sunk $5 billion into Kurdistan’s oil fields, hope they will finally begin to enjoy the rewards.

There’s just one problem: Baghdad may have given the green light for exports, but it has yet to agree on how the companies who produce the oil should be paid. This has happened before. For a few months in 2009, oil companies exported their product without payment. When neither side could agree on the oil companies’ cut, exports were turned off again.

This time, Baghdad says it is prepared to recognize the contracts the regional government has signed with foreign oil companies. But the central government is sticking to its line that the deals must be rewritten, in a way the companies oppose because it will cut into their profits.

So is Kurdistan on the brink of an oil bonanza, or will the promise end up hardening like the oil from its crude-leaching hills?

“The route to getting paid is looking good,” says John Gerstenlauer, Chief Operating Officer of Gulf Keystone, which says it has discovered a field with up to 7 billion barrels of oil. “At the end of the day, none of us are working for a charity so everybody’s going to want to get paid.”

TAWKE, Iraq (Reuters) – Twenty minutes drive west of Erbil off the road to Mosul, 10-15 large silverskinned storage tanks appear in the dusty brown landscape. These belong to the Turkish-owned La Naz Asfalt Company.

Past the entrance guarded by Peshmerga Kurdish army soldiers with AK-47s sit four crude processing units, like barrels on their sides. These tanks with rounded ends are simple mechanisms for heating crude oil, constructed at a total cost of $700,000. Similar devices have sprung up across Kurdistan to process the region’s growing crude output. Foreign oil executives dismissively describe the devices, usually imported through Turkey, as “kettles.”

This is one of Kurdistan’s larger topping plants. It operates 24 hours a day, seven days a week, processing 700 tons of crude each day. Towering above all the tanks is the tall, slender distillation tower, where La Naz collects gasoline and diesel produced by heating the crude.

The company sells the fuel into the local market but is left with heavy fuel oil, which is then processed again in steam-heated storage tanks to produce asphalt to supply Kurdistan’s roaring road-building business. Asphalt is the heaviest and but one of the least valuable of the products extracted from crude.

Beside one large storage tank, six-foot flames roar into the sky, bellowing dark smoke. Workers deliberately started the fire to heat the solidified heavy fuel oil inside. Where the flames wouldn’t reach, they attached blocks of foam to retain the heat.

In a western refinery, smoking a cigarette would earn a worker instant dismissal. Here, beside a raging blaze, no one bats an eyelid. The site’s manager explains: “We built it wrong.” When the fuel oil storage tank was built, they forgot to install the steam heating system that would prevent the fuel coagulating.

The site was built on land donated by the Kurdistan Regional Government to encourage development. The manager says business is good, even though imports of cheap asphalt from the rest of Iraq have dented prices. The site is surfaced with concrete in parts, elsewhere gravel and dust.

LONDON, Feb 3 (Reuters) – Royal Dutch Shell Plc (RDSa.L: Quote, Profile, Research, Stock Buzz) is expected to announced a 75 percent rise in underlying profit on Thursday, powered by higher oil prices and putting more distance between itself and troubled rival BP (BP.L: Quote, Profile, Research, Stock Buzz).

Seven analysts polled by Reuters on average forecast $4.85 billion for Shell’s current cost of supply (CCS) net income, excluding one-offs.

Benchmark U.S. crude prices averaged about $85 per barrel in the fourth quarter, up from $76 in the fourth quarter of 2009.

Shell’s result will put it at the front of the pack.

Exxon Mobil Corp (XOM.N: Quote, Profile, Research, Stock Buzz) reported a better-than-expected 53 percent increase in quarterly profit on Monday, while Chevron (CVX.N: Quote, Profile, Research, Stock Buzz) said net income rose 73 percent.

BP Plc, which is struggling to put the Gulf of Mexico oil spill behind it, reported a 34 percent rise in Replacement Cost (RC) net income. The result would have been up only slightly were it not for $1.4 billion in gains from asset sales.

RC and CCS net income strip out unrealised gains related to changes in the value of fuel inventories, so are comparable to U.S. net income.

LONDON (Reuters) – BP’s existing Russian partners won a UK court bar on its planned Arctic oil venture with state-controlled Rosneft on Tuesday, prompting conciliatory offers from the British oil company.

The dispute reinforced concerns about BP’s recovery from last year’s Gulf of Mexico oil spill as it also reported weaker than expected fourth quarter results, disappointing oil production guidance and a new $1 billion (620 million pound) oil spill charge.

Concerns about the row and its recovery overshadowed BP’s much-anticipated return to paying dividends.

BP’s shares recouped earlier losses to close up 1.3 percent at 491 pence, but still lagged a 3 percent rise in the STOXX Europe 600 Oil and Gas index which was driven by oil prices exceeding $100 a barrel.

AAR, the holding vehicle of BP’s oligarch partners in TNK-BP, had argued that BP’s Arctic exploration deal and share swap with Rosneft breached a previous BP commitment to seek AAR approval before entering into any major new Russian venture.

Under the order handed down by a London court on Tuesday, the two parties have agreed to try to have the issue resolved by an arbitrator by February 25, BP said in a statement.

A Rosneft spokesman said the court move should not derail the deal, and both BP and oil sector analysts expressed confidence the dispute would eventually be resolved.

LONDON, Feb 1 (Reuters) – BP Plc (BP.L: Quote, Profile, Research, Stock Buzz) failed to dispel doubts about its future on Tuesday as its long-awaited return to a dividend payout was tainted by weaker than expected profits and a new charge for the Gulf of Mexico oil spill.

But BP Chief Executive Bob Dudley raised the prospect of a settlement with the group’s Russian partners in joint venture TNK-BP, offering an apparent olive branch even if they were successful in blocking BP’s proposed deal with Rosneft.

Dudley said BP could reach a financial deal with its partners, who are trying to stop the Rosneft Arctic exploration agreement, and suggested TNK-BP could get involved in the deal.

BP shares had dropped 1.2 percent to 478 pence at 1100 GMT, recouping some of its earlier losses. But it was still the biggest loser in the blue-chip FTSE 100 index .FTSE.

BP held out the prospect of long-term growth via new exploration partnerships and a fresh focus on getting oil and gas out of the ground.

This was overshadowed by the court hearing due later on Tuesday at which the company’s partners in TNK-BP will seek an injunction to block BP’s planned joint venture with Russian state-controlled Rosneft.

Dudley said the injunction might well be granted, but insisted that the company expected to settle the dispute with its Russian partners even if the UK court did block its deal with Rosneft.

1 (Reuters) – BP’s (BP.L: Quote, Profile, Research, Stock Buzz) expected return to paying dividends on Tuesday could be overshadowed by a court case taken by its partners in Russian joint venture TNK-BP seeking to halt BP’s planned tie-up with Rosneft (ROSN.MM: Quote, Profile, Research, Stock Buzz).

BP is due to unveil fourth-quarter and full-year earnings on Tuesday, and announce a fourth-quarter dividend of 7 cents/share, after cutting the payout at the height of the Gulf of Mexico oil spill last summer.

However, hours after BP unveils its results, a High Court judge in London will rule on an application by AAR, the holding vehicle of the Russian billionaires who own half of TNK-BP [TNKBP.UL], to halt a planned Arctic exploration partnership between BP and Rosneft.

BP and state-controlled Rosneft, Russia’s largest oil producer, announced their deal, which involves each taking a shareholding in the other, earlier this month.

However, BP’s TNK-BP partners say the Rosneft venture breaches an agreement BP gave to use TNK-BP as its primary vehicle for Russian investment.

BP agrees it needs AAR’s approval to enter the deal with Rosneft but said this was not needed yet as the Arctic joint venture had not yet been formed.

It was unclear whether the judge could block even discussions about the venture.

LONDON/MOSCOW, Jan 31 (Reuters) – BP’s Russian partners in its TNK-BP joint venture turned up the heat on the British company to scrap or modify a rival tie-up with state oil group Rosneft (ROSN.MM: Quote, Profile, Research) by resolving to block a $1.8 billion dividend.

Monday’s move could limit BP’s scope to up its own dividend in the future and may overshadow its results on Tuesday, when BP is expected to reinstate its payout, which it cancelled at the height of last summer’s Gulf of Mexico oil spill.

The AAR consortium, which owns the other half of TNK-BP, is fighting to stop BP’s proposed joint venture with Russian rival Rosneft after the two announced an Arctic exploration deal earlier this month. AAR is seeking a court injunction against it in London on Tuesday in a bid to maintain TNK-BP as the prime vehicle of BP’s operations in Russia and Ukraine.

BP says it needs its partners’ approval to form the planned Rosneft joint venture and wants to resolve the dispute amicably.

AAR’s board decided on Monday to oppose the payment of a fourth-quarter dividend when it is reviewed by the TNK-BP board. A meeting is scheduled for Feb. 18 but company sources said one may be called sooner at the request of the Russian shareholders.

But such a cut should not in the short term preclude BP restarting payments. Its finances are robust after it sold off a chunk of assets, oil is nearing $100 a barrel and the dividend is only half what it paid out pre-spill, analysts said.

However, a long-term cut to the TNK-BP payout could limit BP’s scope for raising its own dividend over time. It relies on the Russian joint venture for a quarter of its production, but high Russian taxes means it provides 10 percent of profits.

LONDON/MOSCOW (Reuters) – BP’s Russian partners in its joint venture with TNK tightened the screws on the British company to scrap or modify a rival tie-up with state oil group Rosneft by voting against a $1.8 billion dividend payout.

Monday’s move could limit BP’s scope to increase its own dividend and overshadow its 2010 results on Tuesday, when the company is expected to reinstate its payout, which it canceled at the height of its Gulf of Mexico oil spill last summer.

The vote against the TNK-BP dividend also comes a day before a London court is due to hear TNK-BP’s lawsuit seeking an injunction against the BP-Rosneft deal.

The dispute is with shareholders in the AAR consortium — which owns the other half of BP’s Russian TNK-BP venture — who have reacted angrily to BP’s artic exploration deal with rival Rosneft, unveiled earlier this month.

AAR wants TNK-BP to remain the prime vehicle of BP’s operations in Russia and Ukraine. Its case will be heard in London on Tuesday, when Rosneft also reports full-year results.

BP said it needed its Russian TNK partners’ approval to form the Rosneft joint venture but added it was still some way off incorporating the unit, suggesting that an injunction might have little practical impact.

BP still hoped to settle the dispute amicably. “We will sort this out between us and them in due course,” a spokesman said.

LONDON (Reuters) – Oil giant BP Plc is expected to reinstate its dividend when it unveils fourth quarter earnings on Tuesday, after it canceled the payout at the height of the oil spill last summer.

Analysts predict BP will announce a payout of 7 cents/share for the quarter, down from the 14 cents/share dividend for the fourth quarter of 2009.

The payout for the U.S.-listed American Depositary Shares is similarly expected to be half the $0.84 per ADS a year ago.

“The key announcement for BP will be whether the company restores the dividend. We expect it will be able to do so, given robust cashflows and reasonable progress on the divestment plan,” Oswald Clint, oil analyst at Bernstein, said.

BP’s fourth quarter earnings are expected to be “solid” despite the impact of the spill, Gordon Gray at Collins Stewart said.

A Reuters poll of nine analysts gave an average forecast of $5.09 billion for BP’s clean Replacement Cost (RC) net income, up 16 percent on the final quarter of 2009, stripping out one-off or non-cash items.

RC net income strips out gains or losses related to changes in the value of oil inventories and as such is comparable with U.S. net income.