ERBIL, Kurdistan Region – An important multi-billion dollar pipeline deal between the Kurdistan Region and Turkey, to get the landlocked Kurdish enclave’s growing oil supplies to world markets, is “official and it is historic,” a source close to the negotiations said.
The agreement comes a week after the Kurdistan Regional Government’s (KRG’s) Natural Resources Minister Ashti Hawrami announced construction of a second pipeline at the Caspian Gas Forum in Istanbul.
“It is official and it is historic," a source close to the deal told Reuters. "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,” the news agency quoted the source as saying.
Last week, Hussein Shahristani, the Iraqi deputy prime minister for energy affairs, once more voiced Baghdad's opposition to the pipeline between the Kurdistan Region and Turkey.
For several years Baghdad and Erbil have been locked in a legal and constitutional battle over building a pipeline, which the central government has opposed, together with direct Kurdish oil exports without Baghdad’s intervention.
According to the Kurds, the Iraqi constitution allows the autonomous region and other governorates to exploit their natural resources and grant oil concessions to foreign oil companies. Baghdad rejects such claims and insists that the federal government must manage all oil concessions and exports.
The latest deal between Erbil and Ankara is a comprehensive pipeline package which comes at a time when Baghdad and Ankara are in the process of mending ties after more than two years of strained relations. Those ties soured over alleged Turkish interference in Iraqi internal affairs, allegations it supported Iraqi Sunnis and the direct Turkish energy deals with Erbil.
The new agreement could unravel that recent rapprochement between Ankara and Baghdad, and have serious geopolitical implications for the region.
In the past, Baghdad has mounted pressure on Washington to stop Kurdish-Turkish energy cooperation. However, Washington has not expressed any disapproval with the deals in recent months.
The first Kurdistan-Turkey oil pipeline is expected to be completed by the end of this year and export some 300,000 barrels per day (bpd) as early as next year. The KRG is confident that oil production of about 200,000 bpd will more than double to 500,000 bpd by the end of this year, rising fourfold to two million barrels by 2019.
Kurdistan is estimated to be sitting on an estimated 45 billion barrels of oil and trillions cubic meters of gas. "We plan to sell 10 billion cubic meters of natural gas to Turkey, and later Europe in the long-term, over the course 0f 18-24 months,” said Hawrami.
"The second pipeline will be mainly for the heavy oil that will come from the northern fields. Taq Taq and Tawke crude is very high quality and blending the two grades would depreciate the value of both crudes," the source close to the deal said.
Kurdistan is building its own metering station at Fishkhabor just north of the federal metering station. The KRG refuses to connect the pipeline before the federal metering station, saying it has lost thousands of barrels of oil in the past through this arrangement.
While Kurdistan’s pipelines are independent, they finally connect to the Kirkuk -Ceyhan pipeline inside Iraqi Kurdistan; spare capacity is used to export oil to international markets.
Turkey is poor in hydrocarbon resources and heavily dependent on Russian, Iranian and Azerbaijani gas to fuel its growing economy. The Kurdistan Region is expected to be a cheaper and more stable source of energy for Turkey, as prices soar in the future.
"Turkey's existing infrastructure is almost ready for this tie-up. Northern Iraq will build its own pipeline, but Turkey could be instrumental here as well and Botas could play a role," the government source told Reuters, referring to the state-owned Turkish energy company.
According to Reuters, Turkish Energy Company (TEC) and the Kurdistan Region will sign a purchasing gas agreement in December.
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