Oil from Iraqi Kurdistan is on the brink of reaching international markets via a new pipeline but will not be exported without permission from Baghdad, Turkey’s oil minister pledged yesterday.
A pipeline connecting Iraqi Kurdistan’s Taq Taq oilfield to the Turkish port of Ceyhan has begun flowing and crude is already being kept in storage, said Taner Yildiz, the Turkish energy minister. He said he hoped to reach an agreement this month with Iraq’s central government in Baghdad, which has so far resisted the prospect of independent Kurdish exports.
“The flow of crude oil from Iraq has begun,” Mr Yildiz told reporters at a press conference in Ankara. “It is being stored. It will not be exported without the consent of the Iraqi government.”
Several UAE companies, including Abu Dhabi National Energy (Taqa), RAK Petroleum and Dana Gas and its sister company Crescent Petroleum of Sharjah, are exploring or own stakes in companies that produce hydrocarbons in Iraqi Kurdistan.
The pipeline will transport an initial 300,000 barrels per day (bpd) and eventually ramp up to 400,000 bpd, Mr Yildiz said.
Built by Genel Energy, the company headed by the former BP chief Tony Hayward, the pipeline heralds the first of billions of dollars in energy trade and investment targeted by Erbil and Ankara. A deal signed in November called for as much as 2 million bpd of crude and 10 billion cubic metres of gas that could flow to Turkey and world markets.
Kurdish oil already reaches international customers via Iran, which takes exports by truck, and Turkey, which reportedly began funnelling lorries of heavy oil from another Kurdish field to tankers last month.
Baghdad’s permission, or the lack thereof, will not stop the flow of Kurdish oil to global markets, said Shwan Zulal, the head of consulting at Carduchi, an Iraqi Kurdistan-focused consultancy.
“As the crude flow has already started, the energy minister appears to toe the line of including Baghdad – but looking at the facts, a Baghdad-KRG deal remains elusive and the oil will eventually be sold in the international market regardless of Baghdad’s agreement on payment,” said Mr Zulal. “The deal with Turkey has already been signed and once Ankara has ticked all the boxes of including the Iraqi central government, the crude will be sold exactly like the trucked oil.”
The pipeline transports oil from Taq Taq, in which Genel holds a non-operating stake, to Fishkabour, a point on the border between Syria, Turkey and Iraq. There, a Kurdish oil pipeline ties into a federally controlled Iraqi pipeline, although flows have been sporadic during a long-running dispute between Baghdad and Erbil.
Baghdad, which relies on a service contract system that allows oil to remain in Iraqi hands, considers illegal Kurdish production sharing contracts that allow foreign companies to book reserves.
Shares of DNO in Oslo rose more than 3 per cent to 24.99 krone yesterday (Dh16.81), while shares of Genel Energy in London notched up 1.3 per cent to £10.89 (Dh66.10).
* with Reuters
Updated: January 2, 2014 04:00 AM