Turkey-Iraqi Kurdistan oil deal proceeds

After years of pipeline construction, the oil and gas deal between Ankara and Erbil is set to move forward.

al-monitor Iraqi Kurdish Minister for Natural Resources Ashti Hawrami speaks during a news conference in Erbil, Feb. 7, 2013. Photo by REUTERS/Azad Lashkari.

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turkey, pipeline, oil & gas, nechirvan barzani, kurdistan regional government, iraqi kurdistan, energy

Nov 28, 2013

Nechirvan Barzani, the prime minister of the Iraqi Kurdistan Regional Government (KRG), Deputy Prime Minister Imad Ahmed and Natural Resources Minister Ashti Hawrami are coming to Ankara today, Nov. 28. Reports say the agreement between Turkey and the KRG on the oil pipeline and Kurdish natural gas will be signed. Barzani will then try to persuade the Baghdad government, which is concerned about the amount of oil to be shipped to Turkey and Baghdad's share of revenues.

Turkey wants the oil revenue, which will amount to billions of dollars, to be deposited in Turkish bank accounts before being shared, but the US government wants the money to be deposited in a US bank account. The Iraqi government, uneasy about the agreement, demands to post an Iraqi auditor in the Turkish stations where the Kurdish oil will be weighed.

Barzani, who will meet with Turkish Prime Minister Recep Tayyip Erdogan and Minister of Energy Taner Yildiz, will then sign the agreement to begin the flow of oil from Northern Iraq at the beginning of 2014. Barzani will then go to Baghdad to finalize the share of the central government in the deal made with Turkey.

Kurdish oil which will come from the Taq Taq and Tawke fields will reach the Turkish border via Zaho and be linked to the Kirkuk-Yumurtalik pipeline near Silopi. Kurdish oil will be measured in stations on the Turkish side. Oil revenue will be shared under US supervision between the Iraqi government and Northern Iraq federation.

The Baghdad government, entitled by its constitution to receive 83% of the oil revenue, wants to post an auditor in Turkey to guarantee its share. Although the Turkish government says the revenues will be deposited in Turkish bank accounts, the US government wants a formula that will enable them to collect the money and then share it. The banks that could receive the oil revenues of about $16 billion a year stand to gain a lot.

The pipeline that will initially transport 400,000 barrels of oil daily will carry one million barrels a day in 2015 and two million barrels in 2019.

The Erbil-Turkey pipeline whose construction began in 2012 and has so far cost $400 million will be the first transit pipeline of the region. With the agreement to be signed today, Turkey will import 1.5 billion cubic meters (53 billion cubic feet) of natural gas. Turkey is expected to pay less from current prices for a total of about $10 billion.

Yildiz answering a question about Nechirvan Barzani’s visit to Turkey, said, “With increasing oil and natural gas production in Northern Iraq, these agreements will enable their production, transportation and distribution. When we talk of current oil pipes, we are talking of the Kirkuk-Yumurtalik line. We want to use the idle capacity in that line. It has a daily capacity of 1.5 million barrels, but today it is working with a capacity of 400,000 barrels.”

Asked if there will be an agreement to be signed during the visit, Yildiz said, “The goal of the agreements will be to meet the needs of both the central Iraqi government and the regional government in Northern Iraq.” Yildiz said the Baghdad government is concerned about the amount of oil to be shipped and their pricing. Turkey will take these concerns into consideration.

Asked if the agreements will be signed with Genel Enerji, Yildiz said that is but one of 39 companies involved. He said Genel Enerji was not Turkey’s counterpart in this deal. “Our opposing party is the government in Northern Iraq,” he added.

Genel Enerji, set up by Turkish businessmen Mehmet Emin Karamehmet and Mehmet Sepil, was later joined by Nat Rothschild, based in London, who is one of the biggest players of the field in Northern Iraq.

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