Iraq’s Kurds to launch gas exports to Turkey via new pipeline

By KHALID AL-ANSARY and BRUCE STANLEY
Bloomberg

Iraq’s Kurds plan to start building a natural gas pipeline next month to export the fuel to Turkey, a project that would bring the self-governed region closer to economic independence.

The link will transport gas from the Khor Mor and Chamchamal fields in northern Iraq’s Kurdish enclave, first to Turkey and later to Europe, said Bewar Al-Khinsi, an economic adviser to the Kurdistan Regional Government. The KRG will begin shipping 10 billion cubic meters/year by the end of 2016 and double the volume to 20 billion by 2020, he said.

“The pipeline will be a source of revenue for the KRG and a step to help Turkey overcome a gas crisis that may arise” as a result of the nation’s soured relations with Russia, an historically important provider of gas for the Turks, he said.

The KRG is struggling to pay its bills, including money owed to foreign energy companies including DNO and Genel Energy. A 35% collapse in the price of Brent crude last year is adding to strain on KRG finances at a time when the regional government must also pay the cost of fighting Islamic State militants that control much of northern Iraq. The country’s Kurds have long chafed against control by Arab-led governments in Baghdad, and gas exports would enhance their financial self-sufficiency.

Kurdish Reserves

The Kurdish region could hold as much as 200 trillion cubic feet of natural gas reserves, more than Algeria or Nigeria, data from BP show. Kurdish reserves represent about 3% of the world’s total deposits, according to the website of the KRG Ministry of Natural Resources. The region also holds 45 billion bbl of crude oil reserves -- equivalent to almost a third of those in the rest of Iraq, according to BP data. Turkey offers the sole route to market for the expanding Kurdish oil industry.

Turkey will help pay for the 831-kilometer (516-mile) network, which will run parallel to an existing oil pipeline, and Ankara-based Botas Boru Hatlari Ile Petrol Tasima will build it, Al-Khinsi said. The 181-kilometer section inside Kurdish territory will cost an estimated $750 million, he said.

The project is the result of an agreement that the KRG and Turkey reached in 2013 to build two pipelines, one for oil and another for gas. It would position the Kurdish region as an alternative supplier of gas to the import-dependent Turks.

Dana Gas

Dana Gas, a United Arab Emirates-based energy company operating in Kurdish Iraq, holds a 40% stake in both the Khor Mor and Chamchamal fields through its Pearl Petroleum Co. venture, according to Dana Gas’s website. All gas produced in the Kurdish region is currently sold locally, and Dana Gas wants eventually to sell fuel to Turkey and Europe, CEO Patrick Allman-Ward said Tuesday in Abu Dhabi.

Genel Energy, the largest independent oil producer in Iraq’s Kurdish area, has offered to supply the KRG with 1.2 billion cubic feet/day of gas over 10 years from its Bina Bawi and Miran fields, according to a report by Bloomberg Intelligence. The company, which would need to spend $3.3 billion, has proposed making an investment decision in the second half of this year, with first gas to flow three years later, the report said.

Turkey relies on imports for almost all of its fossil-fuel needs, with half of its gas coming from Russia. Turkish officials have sought to secure alternative sources of energy since its forces shot down a Russian warplane in the border region with Syria, triggering a deterioration in relations.

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