Cash-Strapped Iraqi Kurds to Start Gas Exports to Turkey in 2016

Iraq’s Kurds will start building their first natural gas pipeline next month to export the fuel to Turkey, a project that would bring the self-governed region closer to economic independence.

The link will transport gas from the Khor Mor and Chamchamal fields in northern Iraq’s Kurdish enclave, first to Turkey and later to Europe, Bewar Al-Khinsi, an economic adviser to the Kurdistan Regional Government, said in a phone interview. The KRG will begin shipping 10 billion cubic meters a year by the end of 2016 and double the volume to 20 billion by 2020, he said.

“The pipeline will be a source of revenue for the KRG and a step to help Turkey overcome a gas crisis that may arise” as a result of Turkey’s soured relations with Russia, an important gas supplier to the Turks, he said.

The KRG is struggling to pay its bills, including money owed to foreign energy companies including DNO ASA and Genel Energy Plc. A 35 percent collapse last year in the price of Brent crude is adding to strain on KRG finances at a time when the regional government must also pay the cost of fighting against Islamic State militants that control parts of northern Iraq. The country’s Kurds have long chafed against control by Arab-led governments in Baghdad, and gas exports would enhance their financial self-sufficiency. 

Kurdish Reserves

The Kurdish region could hold as much as 200 trillion cubic feet of natural gas reserves, or about 3 percent of the world’s total deposits, according to the website of the KRG Ministry of Natural Resources. It also holds 45 billion barrels of crude oil reserves -- equivalent to almost a third of the deposits in the rest of Iraq, according to BP Plc data. Turkey offers the sole route to market the expanding Kurdish oil industry.

Turkey will help pay for the 831-kilometer network, which will run parallel to an existing oil pipeline, and Ankara-based Botas Boru Hatlari Ile Petrol Tasima AS will build it, Al-Khinsi said. The 181-kilometer section inside Kurdish territory will cost an estimated $750 million, he said. The project is the result of an agreement that the KRG and Turkey reached in 2013 to build two pipelines, one for oil and another for gas.
 
Dana Gas PJSC, a United Arab Emirates-based energy company operating in Kurdish Iraq, holds a 40 percent stake in both the Khor Mor and Chamchamal fields through its Pearl Petroleum Co. venture, according to Dana Gas’s website. All gas produced in the Kurdish region is currently sold locally, and the company wants eventually to sell fuel to Turkey and Europe, Dana Gas Chief Executive Officer Patrick Allman-Ward said Tuesday in Abu Dhabi.