A new series of multi-billion dollar pipeline deals for Turkey and Kurdistan are boldly paving the way for Kurdish oil and gas independence from Baghdad by linking up reserves to international markets and promising Turkey 10 billion cubic meters per year of gas.
On 6 November, Reuters, citing unnamed sources involved in the talks, said the package of deals was finalized last week during a trip to Istanbul by Kurdistan Regional Government (KRG) Prime Minister Nechirvan Barzani.
The package includes the construction of a second pipeline for Kurdish heavy oil to Turkey, which is set to handle extra production to the tune of 1 billion bpd as new fields coming online later this year and during 2014. The pipeline should be fully completed in 18-24 months.
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There is already one oil pipeline nearing completion in the form of a tie-in to an existing pipeline running from Kirkuk, in the Iraqi disputed territories, to Turkey. The tie-in could handle up to 700,000 bpd from Kurdistan and should begin operating in December.
"It is official and it is historic," Reuters quoted a source close to the deal as saying. "For years, Turkey has deliberately avoided getting involved in northern Iraq but now it is the beginning of a new period. It was a bold but a very necessary move."
As for the central Iraqi government in Baghdad, the news brings with it a finality that Baghdad can no longer control. The KRG authorities have vowed to share the oil revenues with the central government—assuming Baghdad makes no attempt to block these deals it views as illegal.
Turkey’s role in developing Kurdistan’s oil and gas resources has been significant—and continues to grow. A new state-backed company, Turkish Energy Company (TEC), has even been established to work in Kurdistan in partnership with ExxonMobil.
Hussein Shahristani, Iraq’s deputy prime minister for energy, noted last week that “Turkey is aware of Iraq’s concerns” over the energy deals, adding that Turkey had promised to honour its agreement with Baghdad and that “they wouldn’t allow the export of Kurdish oil without the consent of the Iraqi government.”
In the meantime, more fields are set to come on line soon in Kurdistan, with the most recent development this week in the Arki-Beijeel block, where MOL Group’s Kalegran Ltd. subsidiary declared commercial viability of two oil discoveries. Early production could start in the first quarter of 2014.
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The Kurdistan Region sits on an estimated 45 billion barrels of oil and the new pipelines could mean 2 million bpd of exports.
Tony Hayward, CEO of Genel Energy, the largest producer in Kurdistan, recently told Oilprice.com: “The relationship between the KRI and Turkey is now very strong, and this has helped the Kurdistan Regional Government to take control of its own exports. The strength of this relationship has helped to give significant momentum to the Kurdistan oil and gas industry.”
Genel’s Taq Taq and Tawke are on track to deliver 140,000 barrels a day of working interest production capacity by year end-2014.
As for Baghdad’s response, Hayward believes that new pipelines will add “a positive political benefit, allowing for increased exports of oil from the Kurdistan Region of Iraq with regular and stable payments that will benefit Iraq as a whole.”
By. Joao Peixe of Oilprice.com