Iraqi Kurdistan will refine enough crude to satisfy local demand by next year, and may even begin exporting some products, Kurdistan's energy minister said on Monday.

Energy exports from the autonomous region are a sensitive issue for the central government in Baghdad which is locked in a long-running dispute with Kurdistan over control of oil and land along their internal border.

Kurdistan is short of products such as diesel and kerosene, filling the gap with around 15,000 barrels per day (bpd) of supply from Iraq's refineries, Kurdish officials say.

"In terms of the refinery, by next year we will be fully self-sufficient," Natural Resources Minister Ashti Hawrami said at a conference in Arbil. "This year we are importing some products and we are receiving some small amounts from Baghdad, but by next year, we might even be exporting."

A major expansion of Kurdistan's Kalak refinery is expected to boost its capacity from 40,000 barrels per day to 100,000 bpd by the end of this year.

Kurdistan relies on the central government for a share of the national oil revenue. But the region is working to reduce its dependence on Baghdad, which says only it can define energy policy and control national oil exports.

At present, Kurdistan exports crude from its fields through a Baghdad-controlled pipeline to the Turkish port of Ceyhan. But it has already started trucking small amounts of fuel bi-products to Turkey in exchange for fuel.

The Kurdish region also plans to start exporting its oil along a new pipeline to the Turkish border by August 2013.

Relations between Baghdad and the regional government have been further strained since Kurdistan signed deals with oil majors such as Exxon and Chevron, contracts the central government rejects as illegal.

Hawrami said talks were underway with other oil companies interested in entering the region, and that more contracts were coming: "In the next few months, you'll see new names on the map," he said, without giving any details.

Last month, sources said Royal Dutch Shell, which has several large projects in the south, was considering options in the Kurdistan region, but Iraq's Deputy Prime Minister for Energy subsequently denied it. – Reuters