Turkish Energy Minister Taner Yildiz and Iraqi deputy Prime Minister for Energy Affairs Hussain al-Shahristani have said they agreed that oil exports from Iraq will require the approval of the central government in Baghdad.
The central Iraqi government and the Kurdistan Regional Government (KRG) are at odds on who controls what aspects of the energy sector. The Turkish and Kurdish governments reportedly agreed to honour a provision to allocate 83% of the export profits to Baghdad and 17% to the KRG. On 3 December, the Kurdistan Regional Government said in a statement it was taking full responsibility for the oil pipeline transportation process to replace the current trucking of oil to Turkey, but is inviting the federal government and others to act as observers to the process. Turkey shares a border with Kurdistan and it’s easy for Turkish companies to get oil from the resource-rich region.
Turkey has been reportedly also in talks with the government of Iraq’s semi-autonomous Kurdistan region to conduct exploration activities.
Leo Drollas, Director and Chief Economist for the Centre of Global Energy Studies (CGES) in London, told New Europe on the sidelines of the Energy and Development conference organised by the Institute of Energy for South-East Europe (IENE) in Athens on 3 December that the central Iraqi government does not want to give up its right to control the oil flows and its share of the revenues.
“They won’t give that up easily. It’s a very tricky balance. And so far the revenues come through the central government because they control the pipeline going to Ceyhan,” he said.
“The problem is the Kurds and the historical complication that this brings. Turkey’s Kurds and the Iraqi Kurds are part of the same family and they need to have good relations with their own Kurds in order to encourage the other Kurds to sell them oil,” Drollas said. “But there is logic to this because of the geographical proximity so it makes a lot of sense for Turkey to buy oil from Kurdistan and there are lots of great resources there,” he added.
Last month, ExxonMobil was about to start drilling for oil in the Kurdistan region of northern Iraq. Not only small companies but also energy majors prefer Kurdistan “because the terms are better,” Drollas said. “The Kurds are trying to entice them to develop the Kurdish oil fields,” he said, adding that the terms in the southern Iraqi vast oil fields are not very good and the security situation is deteriorating.
“ExxonMobil and some of the others are concerned about other aspects – the profitability of it, the security and they say: ‘Why don’t we go to Kurdistan, which has big reserves? It might be easier.’ But it means that the relationship between them and the central government in Bagdad has to be considered,” Drollas said. “They have to weigh which is better: To be on good terms with the federal government, which after all has the power, or the Kurds who have the willingness. It’s a tough balancing act. But ExxonMobil seems to think it’s a better deal and to forget about southern Iraq,” he said.
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