Photographer: ALI AL-SAADI/AFP/Getty Images

Rosneft Tightens Ties in Iraqi Kurdistan With Pipeline Talks

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  • Russian company may finance gas link to Turkey and Europe
  • Discussions announced in run-up to region’s independence vote

Rosneft PJSC, the Russian oil giant backed by the Kremlin, looked to deepen its foothold in the Iraqi Kurdish energy industry by suggesting it may fund a planned natural-gas pipeline to Europe.

Russia’s biggest crude producer could reach an agreement on financing the project by the end of the year, Rosneft said Monday in a statement

The announcement underscores Russia’s interest in the northern Iraqi region, which is due to hold an independence vote next week. Rosneft, which previously prepaid money to Kurdistan for future crude deliveries, is among foreign oil and gas producers attracted to the province by its low operating costs. Yet the continued battle between local armed forces and Islamic State, which has sapped state funds in recent years, raises risks for investors.

The proposed pipeline may start exporting gas to neighboring Turkey and Europe in 2020 and reach a capacity of 30 billion cubic meters a year, Rosneft said. That’s similar to another planned link led by Gazprom PJSC, designed to send an annual 15.75 billion cubic meters to Turkey from Russia as soon as next year and the same amount to Europe starting in 2019. The rivalry between the two companies isn’t new: Rosneft fought Gazprom’s state monopoly on pipeline-gas exports from Russia for years.

The Rosneft agreement would allow the company “to play a leading role in the building and expanding of Kurdistan region’s gas-transport infrastructure and create synergy with existing projects,” Rosneft said. 

Fast-Track Project

The accord will speed up development of the region’s gas industry, Ashti Hawrami, minister of natural resources in the Kurdistan Regional Government, said in a separate statement. “The pipeline will be built on a fast-track basis and accelerate delivery of export gas to the Turkish market and to the European Union,” he said.

Iraq’s Federal Oil Ministry wasn’t available for comment.

Political risks have intensified as the leaders of the semi-autonomous Kurdish region push ahead with the independence referendum. The plan for the Sept. 25 plebiscite -- to be followed by another for a new parliament and president on Nov. 6. -- has drawn the ire of Iraq’s government, the U.S. and Turkey.

Four years ago, Turkey allowed the KRG to build an oil pipeline toward Europe across its territory and start exports, bypassing the federal government. Yet it opposes the forthcoming vote and supports Iraq’s territorial unity, it said last week before starting military drills near the Kurdish border.

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