Turkey on the frontline of Iraq's Kurdish oil row

AA

A move by Iraq’s Kurdish Regional Government to export 100,000 barrels of oil per day through Turkey is a tactical move brought about by U.S. pressure which could change after April 30 elections in Iraq, experts have told Anadolu Agency.

Baghdad has been opposed to the export of stored Kurdish oil from Turkey's south-eastern port of Ceyhan on the accusation that it violates Iraq’s constitution as it would bypass the country’s national oil company, SOMO.

Currently, 1.5 million barrels of oil are sitting in Ceyhan -- which has a total of storage capacity of 2.5 million -- and are awaiting Baghdad's approval to be exported. 

The KRG has been embroiled in a long-running row with the central government in Iraq over a proposed 17 percent share from oil revenues. The dispute has lead to political boycotts by Kurdish MPs over Iraq’s draft budget with the KRG refusing to withdraw demands, claiming it could never receive its fair share of oil wealth. 

Talks between Irbil and Baghdad have so far failed to find a solution. 

However, in a sudden move, following a phone call on Thursday between KRG President Masoud Barzani and U.S. Vice President Joe Biden, Kurdish authorities revealed that they would accept the export of 100,000 barrels of oil per day through SOMO from April 1 as a "gesture of goodwill" while negotiations for a permanent deal with Baghdad continued. 

Now Turkish, Kurdish and American experts have given AA their analysis on the dispute’s likely outcome.

Ali Semin, from the Istanbul-based think-tank BILGESAM, said the decision was a result of intensified mediation last week by Biden and U.S. ambassador in Baghdad, Stephen Beecroft.  

Kurdish crude sales to rise as exports reach second Turkish port

Reuters          Julia Payne and Peg Mackey


* Taq Taq crude exports to reach about 60,000 bpd by end June
* Kurdistan to start deliveries to second terminal in Turkey
* Crude in steady stream to Northern Europe


Iraqi Kurdistan's crude oil sales to world markets, deemed illegal by Baghdad, are set to rise by nearly 50 percent next month as trucks start deliveries to a second export terminal in Turkey, industry sources in the region said on Wednesday.

Crude exports from the Taq Taq oilfield in the autonomous northern region to Turkey's Mersin port started at a trickle in early January and have risen to just over 40,000 barrels per day (bpd).

They are expected to hit around 60,000 bpd by the end of June as trucks unload at the neighbouring Dortyol terminal in southern Turkey.

Oil lies at the heart of a feud between the central government and Kurdistan. Baghdad says it alone has the right to control exports and sign deals, while the Kurds say their right to do so is enshrined in Iraq's federal constitution.

In retaliation, Iraq's State Oil Marketing Organisation (SOMO) sent letters warning customers not to touch any oil that had not been marketed by SOMO and the ministry intends to sue producers, namely Anglo-Turkish firm Genel Energy.

Turkey agrees energy deal with Kurdish north Iraq

Daniel Dombey        Financial Times

Turkey has defied both Washington and Baghdad by agreeing an energy deal with the north of Iraq that the US warns could further fracture the Middle Eastern state, but which Ankara sees as central to its own future.

Several Turkish officials confirm Ankara struck a secretive framework agreement earlier this year with the autonomous Kurdish Regional Government of Northern Iraq for Turkish state energy companies to take stakes in the region’s oil and gasfields. They add the deal is still so sensitive that it is unlikely to be acknowledged publicly until after a visit by prime minister Recep Tayyip Erdogan to Washington this week, a trip that takes place against a backdrop of increased tension in Iraq itself.

The agreement, together with Turkey’s political opening towards its own Kurdish population, is set to bolster Ankara’s influence in the energy-rich north of Iraq and could help it generate sufficient energy supplies to meet its ambitious growth targets. Mr Erdogan has previously described the deal as a “win win”.

Kurdish officials welcome closer relations. “Let’s be honest: Turkey is our door to the world,” said one, pointing to the KRG’s problematic ties with other neighbours. “Look at the [strained] situation with Iran, Syria, the rest of Iraq . . . Turkey is a big power in the region and, if it follows good policies like at the moment, why not be an ally?”

But the central Iraqi government in Baghdad says that without its permission the energy agreement violates the Iraqi constitution. A direct pipeline link to Turkey under the deal would give the KRG, which already has its own military force, much greater economic independence than before. At present, the only export pipelines available to the region are federally controlled and the KRG has halted exports through them because of a budget dispute with Baghdad.

Turkey, Iraq warm to new pipeline as supply surges

Today's Zaman

Turkey reiterated its willingness to build a new pipeline in cooperation with energy-rich Iraq for a second time in less than a week after Iraqi Prime Minister Nouri al-Maliki made statements aimed at breaking the ice with Ankara following months of hostile rhetoric.

 

The statements come at a time of new oil discoveries in Iraq with the existing pipeline infrastructure starting to fall short of meeting overseas demand, undermining the war-torn country's potential to boost energy exports incomes. Ankara and Baghdad have been at odds over a disagreement between the two to export northern Iraq's oil via Turkish markets. The latest developments, however, enhanced the chance for reconciliation between the two with the central government in Baghdad appearing to be less skeptical about Ankara's engagement with the autonomous Kurdistan region -- or Kurdistan Regional Government (KRG) -- to the north. Resource-hungry Turkey has heavily courted Iraqi Kurds regardless of the strife with Baghdad and continues doing so.

In an op-ed article published in Washington Post to mark the 10th year of US invasion in Iraq, Maliki said Baghdad “is committed to good relations with all our neighbors … offering the hand of friendship to Jordan, Turkey, Saudi Arabia and Kuwait.” Turkish energy minister Taner Yıldız said in Ankara on Wednesday that the government “is ready to cooperate in building a new pipeline that could serve as an alternative to an existing Baghdad-controlled Kirkuk-Yumurtalık pipeline to Turkey.” Exports via that channel dried up in December -- from a peak of around 200,000 barrels per day (bpd) -- due to a row with Baghdad over payments. Last month Yıldız said the Baghdad government has offered to build a pipeline from the Iraqi oil site of Basra to Ceyhan.

Iraq Energy Profile: Has Surpassed Iran In Producing Crude Oil – Analysis

EIA

Iraq has the fifth largest proven crude oil reserves in the world, and it passed Iran as the second largest producer of crude oil in OPEC at the end of 2012.

Iraq was the world’s eighth largest producer of total petroleum liquids in 2012, and it has the world’s fifth largest proven petroleum reserves after Saudi Arabia, Venezuela, Canada, and Iran. Just a fraction of Iraq’s known fields are in development, and Iraq may be one of the few places left where much of its known hydrocarbon resources has not been fully exploited. Iraq’s energy sector is heavily based on oil. Over 90 percent of its energy needs are met with petroleum (2010 estimate), with the rest supplied by natural gas and hydropower.

Iraq has begun to develop its oil and natural gas reserves after years of sanctions and wars, but it will need to develop its infrastructure in order to reach its production potential. According to estimates by Iraq’s Deputy Prime Minister for Energy, capital expenditures of $30 billion per year in Iraqi energy infrastructure are required to meet Iraq’s production targets. Progress has been hampered by political disputes and the lack of a law to govern development of Iraq’s oil and gas. The proposed Hydrocarbon Law, which would govern contracting and regulation, has been under review in the Council of Ministers since October 26, 2008, but has not received final passage.

Petroleum

Despite having large proven oil reserves, increases in oil production have fallen behind ambitious targets because of infrastructure constraints and political disputes.

Reserves

Iraq revised its estimate of proven oil reserves from 115 billion barrels in 2011 to 141 billion barrels as of January 1, 2013, according to the Oil and Gas Journal. Iraq’s resources are not evenly divided across sectarian-demographic lines. Most known hydrocarbon resources are concentrated in the Shiite areas of the south and the ethnically Kurdish region in the north, with few resources in control of the Sunni minority in central Iraq.

The majority of the known oil and gas reserves in Iraq form a belt that runs along the eastern edge of the country. Iraq has five super-giant fields (over 5 billion barrels) in the south that account for 60 percent of the country’s proven oil reserves. An estimated 17 percent of oil reserves are in the north of Iraq, near Kirkuk, Mosul, and Khanaqin. Control over rights to reserves is a source of controversy between the ethnic Kurds and other groups in the area. The International Energy Agency (IEA) estimated that the Kurdistan Regional Government (KRG) area contained 4 billion barrels of proven reserves. However, this region is now being actively explored, and the KRG stated that this region could contain 45 billion barrels of unproven oil resources.

Turkey seeks deeper energy relationship with Iraq and KRG

Orhan Coşkun     Reuters


Turkey would play an active role in any arrangement in Iraq under which crude oil export revenues are shared between the central government and the northern Iraqi Kurdistan region, Energy Minister Taner Yildiz said on Thursday.

Yildiz told Reuters in an interview Turkey stood ready to support an arrangement under which 83 percent of oil export revenue went to Baghdad and the remaining 17 percent went to the government of the autonomous Kurdistan region.

"There is nothing on this issue that would unsettle the Iraqi central government," Yildiz said.
"Turkey would play an active role in giving the 17 percent to northern Iraq and 83 percent to the Iraqi central government."

Oil lies at the heart of a long-running feud between the central government and the autonomous Kurdistan region. Baghdad says it alone has the authority to control exports and sign contracts, while the Kurds say their right to do so is enshrined in Iraq's federal constitution.

The Kurdistan Regional Government (KRG) started on the path towards economic independence early this year by exporting small volumes of crude oil by truck to Turkey.

Iraqi Kurds woo more oil majors in contest with Baghdad

Julia Payne & Simon Falush       Reuters

Iraqi Kurdistan said it is negotiating with two or three major international companies to operate oilfields and expects to announce the outcome in about a month, in a move likely to further heighten tensions with Baghdad.

The remarks by Natural Resources Minister Ashti Hawrami on Tuesday highlight the autonomous region's resolve to push ahead with development of its oil resources independently of the Baghdad-based central government.

Kurdistan has upset the central government by signing deals directly with oil majors such as Chevron Corp and Exxon Mobil, providing lucrative production-sharing contracts and better operating conditions than in the south of the country.

Last week Hawrami said Kurdistan, which is in the north of Iraq and has run its own administration and armed forces since 1991, had awarded Chevron a stake in the Qara Dagh oil block.

"We are negotiating with two to three other significant companies. They will hopefully be announced in a month or so," Hawrami told reporters on the sidelines of a conference in London.

He also said Exxon Mobil's contentious deal to operate in the autonomous region was on track.

Turkey's big thirst for new power

Photo by Osman Orsal - Reuters

Florian NEUHOF*   The National


Turkey is in a rush to grow its energy sector. And recent news that the Abu Dhabi National Energy Company, known as Taqa, will invest heavily in Turkish coal-fired power plants shows how serious Ankara is taking this commitment.

The deal, announced at the start of the year, will see Taqa build and operate a power generation base totalling 7,000 megawatts, or about 10 per cent of Turkey's electricity needs by the time the plants are completed.

Turkey's energy minister, Taner Yildiz, is keen to emphasise that efforts will be taken to minimise the environmental impact of the country's power sector.

The plants will be fed with lignite, a soft brown coal reviled by environmentalists for the emissions its use entails. Lignite is found in Turkey's soil and offers some relief in the complicated task of securing hydrocarbons from abroad.

Turkey is dependent on imports for 91 per cent of its oil and 98 per cent of its natural gas and it relies heavily on Iran and Russia for its supplies. It is therefore keen to push the share of electricity produced from gas from about 50 per cent to less than 30 per cent in the next decade and to diversify its hydrocarbon sources.
Turkey has reluctantly complied with United States and European Union demands to reduce imports from Iran as part of a new round of sanctions, but its dependence on Iranian supply has meant it has refused to cut economic ties with the country.

Iraq, Kurds, Turks and oil: A tortuous triangle

The Economist

The governments of Turkey, Iraq and Iraqi Kurdistan play a dangerous game

SNAKING their way from Kirkuk, a city 240 kilometres (150 miles) north of Baghdad, through Kurdistan and across Turkey’s eastern region of Anatolia to the Mediterranean are pipes that once carried 1.6m barrels a day (b/d) of Iraqi oil to the global market and yielded fat transit fees to Turkey along the way. The infrastructure underpinned the two countries’ mutual dependence. But nowadays the balance of power has shifted. A third party, the Iraqi Kurds, has changed it. It is unclear who will emerge on top. But Iraq’s central government in Baghdad is on the defensive.

Wars, saboteurs and, since the 1990s, economic sanctions have left the Iraqi sections of the pipeline system in a mess. Barely a fraction of its capacity is used. One of the two parallel lines stands empty and the source that once fed them, the giant Kirkuk oilfield, is dilapidated. The oil ministry in Baghdad has vague ideas about revamping the pipeline, perhaps to carry crude extracted near Basra, in the far south, though this would need an expensive new pipeline to link both ends of the country.

But Turkey is hatching a different plan for its section of the Kirkuk-to-Ceyhan pipeline. Its souring relations with the government in Baghdad have spurred it to cultivate new ties with the Iraqi Kurds’ regional government in Erbil, which oversees the oil and gas that Turkey’s growing economy craves. A wide-ranging energy deal is in the works that will see state-backed Turkish firms and Western oil majors plough money into Kurdish infrastructure and oilfields, connecting them to Turkey and the world beyond. The deal could eventually allow for up to 2m b/d of Kurdish oil exports to go through Turkey.

Last year, trade between Turkey and Iraqi Kurdistan amounted to $8 billion. Turkish money has paid for pristine airports in Erbil and Dohuk, an Iraqi Kurdish city further north, and for other large projects. Not long ago, Turkish politicians, wary of their own large and restless Kurdish minority still fighting for autonomy (or more) in eastern Turkey, barely acknowledged Iraq’s autonomous Kurdish region.