A Review of the Nigerian Energy Industry

Turkey, Kurdistan ink landmark oil export contracts

oil barrels29 November 2013, News Wires – Kurdistan is reported to have signed a package of landmark contracts with neighbour Turkey that could see oil exports via a new pipeline from the northern Iraqi region starting next month.

State-backed Turkish Energy Company, which Ankara set up to operate in northern Iraq, has also signed a contract to operate in 13 exploration blocks in the region that will see it partner US giant ExxonMobil in about half of them, Reuters reported.

The deals, which are set to incense the Baghdad regime, were signed during a three-hour meeting between the Kurdistan Regional Government’s (KRG) Prime Minister Nechirvan Barzani and his Turkish counterpart Tayyip Erdogan in Ankara earlier this week, sources close to the agreement said.

The contracts further envisage the building of a new oil pipeline and a gas pipeline, aimed to help the region’s oil exports to climb to 1 million bpd by 2015. The gas flow is likely to start by early 2017.

However, the federal government claims independent exports by the semi-autonomous region would be illegal under the Iraqi constitution and said late on Thursday that any Turkish energy deal with Kurdistan would be “an encroachment on the sovereignty of Iraq”.

Ankara has been developing closer ties with Kurdistan to secure cheap oil supplies for its expanding economy.

The newly built pipeline to Turkey is projected to carry an initial 150,000 barrels per day from Kurdistan’s Taq Taq and Tawke fields – operated by Genel Energy and DNO International, respectively – before rising to 300,000 bpd in 2014.

The route is now said to be complete and under commissioning, with the KRG also planning a second pipeline with capacity of at least 1 million bpd to carry heavy oil to international markets via Turkey, which could be up and running within two years.

Kurdistan exports via the existing federal oil pipeline from Kirkuk to Ceyhan have remained halted due to an ongoing dispute with the federal regime over payments to foreign producers working in the region.

Baghdad, which is refusing to cough up payments for oil exports, deems production sharing contracts signed by the KRG with foreign companies as illegal in an ongoing stand-off that is part of a wider dispute over resource sovereignty.

Under the deals, payments for KRG’s oil would be collected in an escrow account at a Turkish state bank.

Once the contractor fees are paid, the balance will remain untouched until the KRG and Baghdad reach a deal on revenue sharing.

– Upstream

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