A Turkish-Kurdish Gas Deal Would Have Enormous Implications

16/12/2012 RUDAW By WLADIMIR van WILGENBURG – With or without Baghdad’s approval, in all likelihood Turkey will turn to Iraqi Kurdistan to feed a growing appetite for gas, and this will have enormous implications for the future of the energy-rich autonomous enclave.

As the Kurdistan Region’s focus shifts from exploration to exports of its energy resources, Baghdad has stepped up efforts to block direct energy deals with the enclave by foreign companies and countries. Turkey currently imports more than 90 percent of its oil and gas, and experts say its domestic energy production is in imminent decline. By 2025, Turkey’s natural gas needs are expected to rise up to 90 billion cubic meters (bcm), more than double the current annual imports.

Presently, Turkey is dependent on Iranian and Russian gas; but Ankara is known to want to diversify its sources. Moreover, there is a possibility that Turkey could lose Iranian gas if the United States goes ahead with stricter sanctions against Tehran that would shut down energy imports by Ankara that are paid in gold.

Mehmet Sepil, the Turkish head of Genel Energy which is active in Iraqi Kurdistan, said that Turkey desperately needs Kurdish oil and gas to feed a growing economy and population. He said that his company wants to begin with oil exports from Kurdistan to Turkey, and start with gas in 2015.

Although most of Iraq’s oil and gas is located in its southern provinces, given the strained ties between Baghdad and Ankara an export deal for Iraqi reserves is unlikely between the two. Moreover, contracts outside the Kurdish Region are not very attractive to most foreign energy firms, prompting many to leave.

Ankara prefers Erbil and Baghdad to agree on a mechanism for exporting Kurdish oil and gas to Turkey, but this is also unlikely.

During the important Kurdistan-Iraq Oil and Gas Conference early this month in Erbil, Kurdish officials did not hide their enthusiasm to begin exporting both oil and gas to Turkey — with or without Baghdad’s nod. But in order to realize the dream, the Kurdistan Regional Government (KRG) needs to develop infrastructure, which could take up to three years and would require major investments.  Kurdistan also needs security, stability and political support for exports to begin. The KRG Prime Minister Nechirvan Barzani made clear at the conference that, “The oil and gas in the Kurdistan Region will find its way to international markets.”  He did not confirm any deal with Ankara, but made clear his hopes that Ankara would become more active in Kurdistan’s gas and oil sectors, so that energy exports to Turkey – and worldwide – could become a reality.

Meanwhile, Genel Energy executive Tony Hayward confirmed his company’s hopes of securing sales agreements with Turkish customers for gas from Kurdistan’s Miran field within nine months. Rumors persist of a deal between the KRG and Turkey for both oil and gas pipelines from Kurdistan to Turkey.

Some oil experts and officials expected Turkish Energy Minister Taner Yildiz to announce a deal during the December 3-5 conference in Erbil. But the minister never made it to the meeting: Baghdad barred his plane from landing in Erbil, making clear Prime Minister Nuri al-Maliki’s intentions of blocking any energy deals directly with the KRG, and without Baghdad’s green light.

Now, some observers say a deal between Kurdistan and Turkey could be announced soon — maybe even this month. But even if a deal does go through, its announcement could have to wait for the right time. That is because such a deal would be vehemently opposed by Maliki, since it could be the first step to even greater autonomy for the Kurdistan Region, or even be a step toward an independent Kurdistan that would be dependent on Ankara, not Baghdad. Because of its enormous implcations, any agreement would need approval by the powerful Turkish Prime Minister Recep Tayyip Erdogan.