Arab spring, Libyan crisis, Syrian conflict, hostage crisis on Algerian gas field, etc. overall situation in the Middle East were an example that how political situation the neighboring countries may affect energy map of region. In the Middle East, the geopolitics is one of main factors that formulates the gas industry.
According to the Energy Information Administration of the US Department of Energy, Iraq’s natural gas reserves are estimated to be 3.2 trillion cubic meters. With its 3.2 tcm gas reserves, which is more than Azerbaijan possesses (around 991.1 bcm), Iraq is one of the attractive countries in the Middle East in terms of potential source country. This will enable Iraq to be both exporter of natural gas and use it for domestic consumption. Huge gas reserves of Iraq, more precisely of Kurdistan Autonomous Region of country justifies Iraq’s importance for energy hungry countries, notably for Turkey and the EU.
However, involvement of external energy actors in exploration and drilling activities in Iraq’s gas fields have been prevented because of ongoing divergence between central government of Iraq and Kurdish Autonomous Region on exploration of oil and gas fields and cooperation with third countries. From the other hand, there is also ongoing political dispute between the official Baghdad and Erbil on how to share oil and gas revenues, since most gas fields located in Iraq’s Kurdish region.
Whereas, security threats and political turmoil emanating from emerging ISIL/ISIS makes this country vulnerable to possible attack on pipeline routes and drilling activities. Fact that, ISIS militants have already captured some oil fields and some villages near al-Mansoriya gas field in Iraq. They sell oil in the black market, which brings approximately one million USD per day. Control over the oil and gas fields and pipelines of Iraq by ISIS/ISIL makes a huge concern on transportation and production activities not only for Iraq, as well as for its clients, foreign investors and neighbors, which receives huge volume of Iraqi oil (notably Turkey). For instance, the oil flow of Kirkuk-Yurmutalık pipeline has been suspended by ISIL for three months and remains still under their control. Upon those developments in Iraq, in August, the Irish oil and gas company Petroceltic announced the suspension of drilling and production activities in the Kurdistan Autonomous Region (KRG) of Iraq because of spreading violence by ISIS militants.
Regardless of all political turmoil, perspective of Iraqi gas for the Southern Gas Corridor is also often-mentioned option, as it might be much cheaper than Azeri gas (even Russian gas) in terms of both transportation and exploration. Iraq may contribute to the SGS with existing interconnectors through Turkey’s territory by linking them to Trans-Anatolian Pipeline. However, questions is whether Iraqi natural gas will compete with Azeri gas in a long-term in terms of price setting, though there is not any legal and technical basis to transport Iraqi gas, while there is already one for Azeri gas. In 2009, then-Iraqi PM, Nouri-al-Maliki stated that Iraq could also contribute to SGC with 15-bcm natural gas. Despite the rumors about rivalry of Iraqi gas to Azeri one, Azerbaijani FM, Elmar Mammadyarov invited Iraq to participate at SGC during his visit to Baghdad. Because, if TANAP project will be completed until 2018, the Iraqi gas might be delivered to Europe. If SOCAR act strategically, Azerbaijan may buy Iraqi gas and later sell or transport it (through SGC) as its own gas.
Monopoly of central Iraqi government over energy resources, absence of legislative framework on transportation of resources makes an obstacle for Kurdish Regional Government to cooperate with external energy actors. Among them, Turkey is one of the eager countries to import Iraqi natural gas by connecting Arab Gas Pipeline with interconnectors from Iraq to transport natural gas of Akkas region of Iraq (in the border with Syria) to Turkey. Ongoing civil war and emerging ISIS threat prevented this project of being implemented. Turkey and Iraq were negotiating the construction of Turkish-Iraqi natural gas pipeline, (via Silopi, Sirnak and Diyarbakir) which was going to be realized by Turkish companies TPAO, Tefken and BOTAS. Despite continuing Kurdish problem in its territories, Turkey is eager to cooperate with KRG as well for transportation of Iraqi gas to Europe through its territories. Therefore, tension in relations between official Baghdad and Erbil must be avoided to open the way of gas to Europe.
Although import of Iraqi gas would decrease Turkey’s dependence on Russia and Iran, country’s intention directly to cooperate with Kurdish Autonomous Region without official consent of central government of Iraq, would jeopardize bilateral relations between Iraq and Turkey. Therefore, before granting a license to Siyah Kalem, Turkish Energy Market Regulatory Authority urged Siyah Kalem to sign an official purchase agreement with official Baghdad to get Government’s approval. As Siyah Kalem could not receive Baghdad’s official consent, the EMRA granted the Siyah Kalem with 26 years-long license to import Iraqi gas to Turkey without receiving any official approval from Baghdad. Another company that is interested in exploration in Iraq’s Miran and Bina Bawi (around 8-18 tcf) and Taq-Taq gas fields, is Genel Energy, an Anglo-Turkish exploration and production company. Taq-Taq field is considered to be interconnected to Turkish-Iraqi natural gas pipeline in the future.
Separate agreement between Turkey and KRG will rather lead to disintegration of Iraq’s central government and would isolate official Baghdad from energy projects and revenues. Independence of KRG in terms of energy exploration and its economic autonomy would trigger new possibilities of autonomy in the other regions of Iraq, where Iraqi Turkmens live and where main oil fields are located. Therefore, it is necessary for official Baghdad to coordinate energy issues with Erbil, the best option that would be “production and revenue sharing agreement” between two. There are different options to deliver Iraqi gas to Turkey and onwards: Iraqi-Turkish pipeline and LNG terminal in the Turkey’s Ceyhan port.
KRG justifies its autonomy in terms of energy deals by referring to Article 111 of Iraq’s Constitution of 2005, which states that “oil and gas belong to all the people of Iraq in all the regions and governorates”, but not to federal Ministry of Oil. In this regard, KRG also highlights the provision of constitution, which “give primacy to regional law over federal law, except in areas listed under the exclusive powers of the federal authorities”, the exclusive power that does not encompass the oil and gas sectors. The problem exacerbated when KRG adopted its own oil and gas investment law and signed separate agreements with Hungarian MOL, American General Energy and Hunt, as well as with Turkey regardless of the condemnation of its “illegal activities” by official Baghdad.
Moreover, in 2013 Jordan and Iraq signed an agreement on construction of Basra-Aqaba pipeline from Iraq’s southern region, Basra to Jordan’s port city Aqaba to transport both Iraqi oil and gas that is expected to be operational by 2017. This pipeline will help Iraq to diversify its energy market and routes, while Jordan would secure its domestic energy consumption. The EU and Russian Gazprom also try to access to gas resources of Iraq, which concentrated in Kurdistan Regional Government’s territories. However, the official Baghdad opposes any bilateral energy relations between KRG and third countries.
Click for original article at Newtimes.az: Iraqi Gas in the Light of Recent Geopolitical Turbulences