Erbil and Ankara to sign a strategic agreement
The Iraqi Prime Minister Nouri al-Maliki has tried to persuade the American oil giant Exxon Mobil to withdraw from Kurdistan and resume its investment in the West Qurna 1 field, which is under the control of Baghdad. Exxon’s CEO Rex Tillerson met the Iraqi Prime Minister in January, but has not made any promises, and met with Kurdistan Region’s President Massoud Barzani in Zurich, Switzerland the next day, where he reiterated his company’s commitment to its contracts with the Kurdistan Regional Government (KRG). In a report published by Reuters on the development of Kurdistan Region in the oil and gas industry, Exxon Mobil lawyers and top executives have been examining their decision which could change the balance of power in Iraq if they pull out of Qurna 1 oil filed in Southern Iraq.
Exxon Mobil’s entry into Kurdistan Region’s oil sector has had an significant impact on the development of this region. It consequently encouraged several other oil giants to sign agreements with KRG for exploring oil, including French giant Total, Russian giant Gazprom and American giant Chevron.
Safety and Stability in
Kurdistan Region is safe, which has prompted international investors, and the KRG has been very keen on encouraging new businesses to start-up. This is in contrast to Southern areas of Iraq, where there is no security or safety for work- ers. Unfortunately the Iraqi government has not played a positive role in attracting international oil companies to help develop the poor economic infrastructure of this war torn country. Consequently, oil giants have been more keen to sign contracts with Kurdistan Region, as opposed to central and Southern parts of Iraq.
During the last few years, Kurdistan Region has been relatively autonomous in the energy industry, Reuters reports. This autonomy and development in Kurdistan has even pushed Exxon Mobil to sacrifice its contracts in the south for the sake of having consistent and fast develop- ment with a promising energy industry in the region. An energy expert argues that signing an agreement with Exxon Mobil was a big step towards developing Kurdistan region, and since the agreement this region has changed dramatically. According to the report by Reuters, Kurdistan Region is very rich in oil and gas resources. This has attracted many international energy companies, with many other companies eyeing the region for future investments. The question now has become, how Kurdistan can export its oil rather than whether it has the ability to produce oil.
Kurdistan will not wait
Until recently Kurdistan’s oil was exported via a pipeline that is controlled by the central government. However, this line of export was put on hold last month due to Baghdad’s refusal to pay oil companies’ fees. Reuters reports that KRG authorities will not wait for Baghdad any more, and as a result they have started to export crude oil to Turkey and get refined fuel products in return. Although the volume of exports is small but as per Reuters it is an indication for reaching greater goals in the future, and according to an energy expert “Kurdistan has reached a point in oil and gas sector, where it would not return back and the KRG would no longer support a centralized oil and gas policy”.
Erbil-Baghdad ties have almost reached a deadlock since last year, while KRG has strengthened its ties with neighboring Turkey over the months. A diplomat who is aware about the talks between Erbil and Ankara has said that the two parties are about to sign a very large agreement covering all major energy aspects. The agreement is expected to cover all aspects of exploring and producing Kurdistan’s oil by Turkish companies, marketing and exploring the Region’s oil and gas to Turkey. In the future this could lead Kurdistan to world markets through Turkey. However, in the present Kurdistan Region will no longer be dependent on Baghdad for oil exports. Consequently Turkey would not depend on Iranian or Russian oil and gas either.
Reuters report argues that exploring oil is a great success for the Kurds since the region would receive the revenues of its oil exports directly and it would no longer depend on its 17% share in the Iraqi budget as the only source of revenue for the region. Robin Miles, an exports at the Manarco consultancy company states that, “Assume that Kurdistan exports 1 million barrels of oil per day; the revenue of this export would be much more larger than the budget shares it currently gets from the central government”.
Relations get balanced
Commenting on the ties between Kurdistan and Turkey, a senior KRG official says that Turkey has a significant impact on the economic development in Kurdistan. The KRG official argues that “When we start exporting oil and gas, everything would change, and our relations would reach a complete balance”. Reuters also says that the Turkish government is eagerly working towards improving ties between Ankara and Erbil. Selahattin Cimen, Deputy Energy Minister of Turkey says “cooperation between the KRG and the Turkish government for exporting oil to world markets would strengthen the relations that already exist between us.”
Turkey's Energy Minister Taner Yildiz and Kurdish Natural Resources Minister Dr. Ashti Hawrami speak during the "Kurdistan Region's Road to Development Conference in Erbil, May 21, 2012.