While the semi-autonomous Iraqi Kurdish administration and the central government in Baghdad are locked in a war of words on the right to issue oil prospecting contracts in the Erbil, Sulaimania and Duhok provinces the Kurds have increased the stakes demanding oil rights in the Kirkuk area which is outside their jurisdiction.

An incident which surfaced on Tuesday when Iraqi Oil Minister Hussain al-Shahristani announced "soldiers from the Kurdistan autonomous region are preventing the central government from developing a key Kirkuk oil field" has added to the already cool relations between Baghdad and the Iraqi Kurds.

The key oil field is said to be Iraq's oldest and largest. Shahristani said its development would mean an additional 100,000 barrels of oil a day for Iraq which is currently producing 2.5 million barrels daily.

While the rift has been public, the issue of the Kirkuk oil field project is starting to surface in conflicting accounts.

The minister said Tuesday that peshmerga, the Kurdistan Regional Government's armed forces, wouldn't allow the central government to move forward on upgrading the Kormala Dome, part of the Kirkuk field, according to news reports. The Iraqi Oil Ministry signed a contract with a consortium led by a Turkish company Avrasya to provide equipment and materials to develop Kormala.

Local officials in Kirkuk of the North Oil Company that belongs to the Baghdad government were vague admitting that the company was prevented within the last three months from working on the project but could not point the finger at the Peshmerga forces.

"We have an engineering procurement contract. When equipment arrived, we started working ourselves," Falah al-Khawaja, director general of the State Company for Oil Projects, an arm of the ministry, was quoted as telling the United Press International wire service on the sidelines of an oil conference in London. "They prevented us from continuing our work, which is actually against the law." Khawaja wouldn't elaborate on who "they" actually are.

Press reports said an official with the consortium contracted to supply the project said it's been turned over to the KRG. The official said the company has been told that the KRG has the right to go ahead and develop that field.

Earlier this month KRG Natural Resources Minister Ashti Hawrami announced a service contract to develop the Kormala Dome, as well as an associated oil refinery, to the newly established and region-owned Kurdistan National Oil Co.

"We have shortage of fuel products. Every winter we are suffering. All we are doing is solving that problem by utilizing the crude oil, that's all," he told United Press International last week at the start of his U.S. visit. He has begun meeting political and business officials from Washington to Texas.

It is clear that the KRG has started to put territorial claims on some parts of Kirkuk which also has political implications.

The Kurds have always said while Saddam Hussein launched an Arabization campaign he also took away some of the regions from neighboring provinces like Suleimania and Erbil and incorporated them into Kirkuk province. The Kurds say now they want those regions back and thus lay claim on these areas.

The Kormala Dome region is officially outside the KRG territory but is claimed as historically Kurdish. The Kurds also ave laid claims on several other districts near Mosul and surrounding areas.

The KRG is accused of signing other oil deals outside its "official" territory, including a production-sharing contract with Dallas-based Hunt Oil.

According to the constitution a referendum was to be held by the end of 2007 to determine whether Kirkuk is incorporated into the Kurdish region or remains under the direct control of Baghdad. However, a referendum seems impossible in the near future simply because none of the physical and legal preparations for a referendum have been completed. First the Arabs brought into Kirkuk from different parts of Iraq have to go back to their old homes and Kurds and Turkmens who were driven out of the region have to return home. That is progressing at a very sluggish pace. Once that is completed a population census is required. After that a referendum will be held.

Meanwhile, many Arab countries, Iran and Turkey oppose the referendum and seek a special status for the province. The Iraqi Arabs also want Kirkuk to remain under the direct control of Baghdad. Turkey says the rights of the Turkmen people if the province should be respected and also says if the Kurds get hold of the Kirkuk oil this could be an incentive for them to declare an independent state.

"We are not stealing the oil, it's our oil, it's Iraqi oil, we're entitled to it," Hawrami has been quoted as saying. "If Baghdad can do better, be my guest. Come sit down with us on these two projects. Come work with us. No problem at all. But they cannot be coming there to stop us from doing it. That is not the spirit of the constitution or cooperation."

KRG has angered Baghdad by approving its own regional oil law and signing some 15 contracts with international oil companies to explore its unknown but likely oil-rich territories for oil. Shahristani has called the KRG deals "illegal" and "null and void," though no action has been taken.

Each side also blames the other for stalling a draft national oil law that would decide the rights of the federal and local governments in the oil sector, as well as set the terms for international investment in what has been a nationalized oil sector for more than three decades.

Shahristani, frustrated without an oil law, said he's in talks to sign service contracts with international oil companies. With Washington's reluctant blessing, he is using the powers Saddam Hussein granted to the Oil Ministry as legal justification to sign deals.

Hawrami claimed that violates the constitution.

Kirkuk, which started pumping oil in the 1930s, is estimated to have more than 15 billion of Iraq's 115 billion barrels of proven oil reserves. It produces between a quarter million and half million barrels per day.

Sixty Iraqi oil professionals who have at times criticized the KRG and Baghdad for its dealings with the oil law this week sent a letter condemning the KRG deals to Shahristani and the Iraqi Parliament.

"There is no hard line drawn somewhere that says this is KRG controlled territory and these are disputed territories, it is all gray areas," Hawrami said, defending his deals. "We provide the security; administratively we run the towns and villages in that area. It is and has always been under control of KRG, under our security."

"Assuming we go a step further and say it is not, say it transpires later on we were wrong for some reason," he added. "Well the contract is an Iraqi contract anyway and whoever controls that region can administer the contract. It is no problem."

Hawrami also the KRG plans on producing 1 million barrels -- nearly half of Iraq's total production today -- in five years.

"Bear in mind all exploration takes three to five years before we get to a point that we potentially export," said Hawrami.

He said currently there is no oil being produced in the KRG, aside from test oil from the Take oil field. Danish firm DNA won the production-sharing contract for the field in 2004 and is now doing "preparatory work for the long-term production," Hawrami said.

Another field, Taq Taq, signed to a joint venture between Turkey's Gen el Enteric and Canada's Addax Petroleum, will also contribute to short-term production in the KRG, he said.

"Within about two years: 200,000 (barrels per day), building up to 350,000, and then building up to a million within five years," Hawrami said. Iraq has averaged about 2 million barrels per day since 2003, though in recent months tighter security has increased it to nearly 2.5 million bpd.

He said most of it will be exported, though tensions with Baghdad, as well as Turkey, Syria and Iran -- with fears their Kurdish populations will be emboldened by Iraqi Kurdish success -- are likely to block any export routes.