RWE joins Kurdistan's gas effort

Kurdish hopes of exporting natural gas from northern Iraq have been bolstered by the German company RWE's offer of assistance.

The planned Nabucco pipeline would be able to move up to 20 billion cubic metres a year.
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Kurdish hopes of exporting natural gas from northern Iraq have been bolstered by a German company's offer of assistance. On Friday, the big German gas and power company RWE signed a co-operation agreement with the regional government of the semi-autonomous Iraqi Kurdistan. The object is to create pipeline routes and other infrastructure for marketing Kurdish gas.

RWE said it also hoped to forge "supply agreements to enable gas from the region to be transported to Turkey and Europe via the Nabucco pipeline". The utility is a member of the Nabucco consortium, which is seeking to build a ?7.9 billion (Dh37.04bn) pipeline to move gas from the Middle East and central Asia to Europe through Turkey. The group will hold an "open season" this year to gauge customer support before making a final investment decision early next year. But it is still seeking firm gas supplies.

Last week, the consortium said it would build branch lines to intersect Turkey's borders with Georgia and Iraq, postponing for political reasons a proposed branch to Iran. Nabucco now hopes to start moving gas from Azerbaijan, Turkmenistan and Iraq in early 2015. But the only Iraqi fields ready to export gas in that period are in Kurdistan. Nabucco's other partners include OMV, the Austrian petroleum group 20 per cent owned by Abu Dhabi's International Petroleum Investment Company, Hungary's MOL, Romania's Transgaz, Bulgarian Energy Holding and the Turkish state-owned pipeline company Botas. OMV and MOL are also in partnership with the Sharjah companies Crescent Petroleum and Dana Gasto develop two big Kurdish gas and condensate fields.

Independently, MOL has discovered a third gasfield in the region and is seeking to develop the find with its 20 per cent partner Gulf Keystone, a Bermuda-registered company with links to Sharjah. Ashti Hawrami, the Kurdish natural resources minister, said the agreement with RWE would provide the means for Iraqi Kurds to benefit more fully from the region's gas reserves and for all Iraqis to benefit from export revenues.

"This will fund the reconstruction of the whole country after the disruption and neglect of the past," he said. "The location of gas reserves in the Kurdistan region of Iraq makes them ideally placed to gain access to the secure and profitable European gas market. Transporting this gas - up to 20 billion cubic metres a year - through the Nabucco pipeline is a priority for us." Mr Hawrami said the deal would also "serve to cement" the Kurdish region's "already good relations with Europe and Turkey".

The relationships are crucial because Kurdistan may need considerable international support to get its gas across the Turkish border. To date, a long-running dispute between the regional government and Baghdad over natural resources jurisdiction has hampered Kurdish efforts to develop a legitimate oil and gas export stream. Hopes of a reconciliation after the Iraqi national election last March are in limbo because of Iraq's failure to form a new government.

This month, however, Russian sources revealed that Ayad Allawi, the leader of the Iraqiyya bloc, which won the most seats in the election, was a director of Crescent. A political alliance between the Kurdish government and Iraqiyya may be in the making. At the same time, the Iraqi Kurdish leadership has been mending fences with Ankara, which is at odds with the restive Kurdish population of south-east Turkey.

RWE could help Kurdistan build on this groundwork. Independently of Nabucco, the German company has been developing business in Turkey. In May, it announced a final decision to build a ?500 million gas-fired power plant near Denizli in western Turkey. As RWE has sought to drive Nabucco's agenda forward against stiff competition from Russia's South Stream pipeline project, the company has also held talks with Caspian states. That cleared the way for a meeting in Berlin last February between the German chancellor, Angela Merkel, and the Azerbaijani president, Ilham Aliyev.

Ten months earlier, RWE signed a partnership agreement with Turkmenistan on gas exploration and exports. So far, Nabucco's project map does not show a branch extending as far east as Kurdistan, but the chances of timely gas exports from the rest of Iraq are poor.