Iraq’s Unity Hinges on Flexibility Over Kurd Oil, Hawrami Sa

[Aslan]

Iraq’s Kurdish region could export 250,000 barrels of oil a day this year and is “on track” with discoveries to ship 1 million barrels a day by 2015 and 2 million by 2019, its natural resources minister said.

The semi-autonomous Kurds aren’t seeking independence from the rest of the country, Ashti Hawrami said in a statement posted today on the Kurdistan Regional Government’s website. Even so, Iraq’s political cohesion depends on the Kurds’ ability to produce and sell oil on their own terms, he said.

“We wish to remain part of a democratic and federal Iraq, but given the country’s troubled history of authoritarian rule, we believe a decentralized oil policy and the sharing of power and wealth is essential to Iraq’s unity,” Hawrami said.

Iraqi Kurds are sparring with the central government in Baghdad over the sharing of revenue from crude sales, investments in Kurdish oil fields by foreign companies such as Exxon Mobil Corp., and territorial claims. Hawrami’s comments came amid increasing speculation that the KRG may be preparing to build its own pipeline network to export oil and natural gas to neighboring Turkey, as a step toward economic self- sufficiency and, possibly, political independence.

The Kurds halted exports through the government-operated pipeline in December, due to a payments dispute, and have been trucking crude into Turkey instead. Turkey, which relies on energy imports, told Iraq’s government that it’s ready to build pipelines to transport oil from the landlocked Kurdish enclave once the Baghdad-run network reaches full capacity, Turkish Energy Minister Taner Yildiz told reporters April 10 in Ankara.

Kurds ‘Entitled’
“The KRG is entitled to and can make the oil and gas exports happen and prefers to do this with Baghdad,” Hawrami said. “But sadly, those in charge there refuse to honor agreements.”

Turkey is bound by a 15-year accord with Iraq’s central government on all oil-related business and any separate Turkish agreement with the KRG would “endanger” Turkey’s interests in Iraq, Iraqi Oil Minister Abdul Kareem al-Luaibi said in an April 1 interview. Differences over the conflict in Syria have strained relations between Turkish Prime Minister Recep Tayyip Erdogan and his Iraqi counterpart Nouri al-Maliki.

Iraq has the world’s fifth-largest crude reserves, according to data from BP Plc (BP/), and it revised its estimate upward last week by almost 5 percent to 150 billion barrels. The nation’s Kurdish region holds an additional 45 billion barrels, according to the KRG. Iraq produced 3.2 million barrels a day in March, data compiled by Bloomberg show.

Northern Exports
The country exported 2.43 million barrels a day last month, according to the International Energy Agency. Of Iraq’s total shipments, 330,000 barrels a day flowed from the northern oil hub of Kirkuk and into Turkey through the pipeline controlled by the central government, the IEA said in its monthly report published on April 11.

“By 2019, over 3 million barrels a day of oil could flow through Iraq’s northern energy corridor to Turkey and the international market,” Hawrami said. “Export infrastructure must be built, but this requires tackling bottlenecks through additional feeder and export pipelines.”

Genel Energy Plc (GENL), the largest producer in Iraq’s Kurdish region, announced a discovery on April 10 at the Chia Surkh site. The first of five wells at the field flowed 11,950 barrels of oil a day and 15 million cubic feet of gas, the company said in a statement. Chia Surkh may hold more than 300 million barrels of oil equivalent, former BP Plc Chief Executive Officer Tony Hayward, who runs Genel, said in a phone interview.