Kurdistan: oil pipeline to Turkey is a reality

Iraq’s semi autonomous region of Kurdistan has given its clearest signals yet that it is preparing to realise the export of oil and gas by pipeline via Turkey, independent of the Iraqi central government in Baghdad.

Ashti Hawrami (pictured), the Regional Government’s minister of natural resources, said that the central government will have to accept that the Kurdistan Regional Government can export oil and gas without interference from Baghdad.

Speaking at a conference in Istanbul on October 31, Hawrami said: “Nowhere in the world does 1m barrels a day (of crude oil production capacity) remain stranded forever.”

“Oil export is a reality, it is happening,” he said referring to the fact that following the breakdown last year of an agreement with Baghdad which saw Kurdish crude exported through the Baghdad controlled Iraq-Turkey (Kirkuk-Ceyhan) pipeline, Kurdish crude has been exported through Turkey by truck, independent of Baghdad.

Hawrami pointed to the parliamentary elections, scheduled to be held in Iraq early next year as key to a possible agreement between the two sides which would allow the creation of a new legislative framework which will allow the KRG to export freely.

“The passing of the hydrocarbon law and the revenue sharing law are constitutional requirements and must be implemented as these are the pillars of stability of Iraq. Without these two laws Iraq will never be stable,” he warned.

According to Hawrami, the long running dispute with Baghdad centres on revenue sharing.

Both sides should pool the revenue from their respective exports in a basket and share them according the formulae established in the constitution, he said pointing out that the potential size of revenues from the region may persuade Baghdad to accede.

The KRG is targeting crude exports of 1m b/d by 2015 and 2m b/d by 2019-20 with gas exports to start by 2016 – all of which would by geographical necessity have to be to or through Turkey.

How such exports can be arranged though is unclear.

Turkey has long appeared to back the KRG in its revenue disputes with Baghdad, even offering to administer an escrow account into which hydrocarbon revenues could be paid and apportioned.

To date though it has stopped short of openly supporting any moves to establish any direct pipeline links from the region independent of Baghdad, even through three crude lines are reported to be under construction by developers, close to the Kurdish region’s border with Turkey.

Ankara’s reluctance may be in the hope of being able to broker a deal that will suit all three parties. That could now be on the cards.

A recent thawing of relations with Iraq has seen Turkish Foreign Minister Ahmet Davutoglu invited to Baghdad earlier this month, a move that has been interpreted as a possible new start in relations between the two countries.

Whether or not Ankara can persuade Baghdad to cut a deal with the KRG allowing free exports to and through Turkey remains to be seen.

If not, the distraction of the upcoming Iraqi elections may prove the ideal time for a cross border pipeline link to be constructed, and dealt with by whatever Iraqi government emerges.

Related reading:
Turkey: gas licence speaks volumes about Kurdish relations, beyondbrics
Kurds round on Dana Gas over $1bn claim, FT
Genel Energy confident on prospects for Iraqi Kurdistan oil, FT