Home
Iraq's oil and natural gas reserves hold great importance for Turkey, a country which is highly dependent on imports for energy consumption.
05/09/2014
Picture
Iraq has been struggling to stabilize politically since the US invaded in 2003 and removed the Baathist regime of Saddam Hussein, yet Iraq has become Turkey's second largest trade partner after Germany. As of 2013, Iraq and Turkey have a trade volume of $12 billion.According to the American Energy Information Administration (EIA), Iraq holds the world's fifth largest known oil reserves with 143 billion barrels.According to the EIA, Iraq has 3.1 trillion cubic meters of known natural gas reserves, the world's 11th biggest proven natural gas reserves. Yet problems with infrastructure and bureaucracy have meant that Iraq is not able to produce 1 billion cubic meters of gas yearly.Even if Iraq was to overcome its problems in production, the unresolved question is how this gas will reach international markets. Turkey's Southern Gas Corridor project, which will supply Europe with gas from Azerbaijan via Turkey, seems like the most viable option.As Europe's fastest growing energy market with nearly 45 billion cubic meters of domestic natural gas consumed every year, Turkey is a natural customer for Iraqi gas.
Michael Knights, a fellow at the Washington Institute for Near East Policy, told the Anadolu Agency that the key problems facing federal (southern) Iraq in the hydrocarbons sector is the lack of administrative capacity and human capital to process dozens of strategic projects simultaneously. "Iraq lacks both administrative capacity and human capital. So key bottleneck projects like Basra oil storage and export facilities, or water injection facilities for upstream fields, hardly progress at all for years," Knights said.
Underlining that security is once again blocking Turkish and Jordanian oil export routes, Knights said existing and planned pipelines are becoming untenable.
Northern Iraq's Kurdish Regional Government (KRG) have a more business-friendly approach that rewards investors for taking exploration risks, said Knights, adding that Baghdad is more traditional, seeking to maintain state control of oil sales in less lucrative deals that provide lower return on investment to international oil companies (IOC).
Knights explained that a possible solution to the current impasse between KRG and Baghdad would be to ratify the 2014 Iraqi budget, with no punitive clauses that could threaten KRG's budget.
"The Kurds should export oil in collaboration with the state marketer SOMO, with Baghdad remitting the oil revenue directly back to Iraqi Kurdistan. This is what the Americans, the Turkish government, IOCs and even Baghdad ultimately want. It is a win-win-win solution," Knights said.
The KRG region of northern Iraq is believed to have one of the largest untapped oil reserves in the world, with more than 45 billion barrels of oil according to some estimates. In November 2013, KRG signed an agreement that would enable Kurdish oil to flow to Turkey's port of Ceyhan.
Baghdad opposed the agreement, claiming it would bypass the country’s national oil company SOMO (State Oil Marketing Company) and violate Iraq’s federal constitution. For months, KRG's capital Irbil and federal Iraq's capital Baghdad have been embroiled in a row over shares of oil revenues.
[You must be registered and logged in to see this link.]
Modify message
