Turkey Secretly Builds Presence in Iraqi-Kurdistan Oil Industry

In an effort to wean itself off expensive energy imports from Russia and Iran, Turkey has been secretly building its presence in Iraqi-Kurdistan, both on its own, and in joint ventures with Exxon Mobil.

In a strategy that will surely anger Baghdad, just a few months ago Ankara established a state-backed firm to explore for oil and gas in Kurdistan. TPIC and Botas, the state-owned oil firm and pipeline operator, are shareholders of the new firm that has already started exploration in a dozen blocks in Kurdistan, including several ventures where Exxon Mobil is already present.

Turkey's energy deficit is growing, making the country's economy very vulnerable to external events and price shocks. Forecasts only see their demand for energy growing, so Turkey has to work hard to try and reduce the cost of its imports.

A source closely involved with the state-backed company operating in Kurdistan told Reuters that "when you have such an energy deficit and you have such a big potential on your border, you can't let Baghdad or anything else get in the way. You have to find a formula and make sure this oil flows through your country."

Turkey risks trouble with Baghdad, who has constantly warned foreign investors and governments from working with Kurdistan, claiming that those oil fields still belong to Iraq. They fear that efforts to increase the independence of the Kurdistan region will only work to ultimately break-up Iraq.

But Ankara has, as of yet, been unperturbed by those calls, and along with foreign oil majors such as Exxon, Chevron, and Total, have already signed exploration deals with the KRG.

Turkey is also involved in the construction of a new pipeline that will allow Kurdish crude to be transported from the Taq Taq oilfields directly acorss the border into Turkey, where it will join the Kirkuk-Ceyhan pipeline. This route will allow the KRG to avoid Baghdad and any payments associated there.

In 2012 the KRG stopped exporting their crude via the Iraqi federal pipelines due to payment disputes, and instead began using trucks to take the oil to Turkey.

Once finished, the pipeline will start pumping around 200,000 barrels a day into Turkey.

Turkeys quiet expansion into Kurdistan is taking place at the same time as a fragile peace is begin negotiated with Kurdish militants, after a 30 year dispute.

By. Charles Kennedy of Oilprice.com