Oil and gas - riches and risks of Iraq's Kurdish autonomy

By Aygul Taghiyeva

Recently, the question of the world's major energy companies entering the oil sector of Iraq's Kurdish autonomy and as a consequence, the deterioration of relations between the central government of Iraq and the Kurdish administration has become more and more topical.

The media outlets reported that the Russian Gazprom signed two agreements on the development of fields in the Kurdish autonomy, as previously done by U.S. companies Exxon Mobil and Chevron and French Total.

Shortly before this, Turkey began to import oil from the autonomy. However, neither Turkey nor the world's oil companies were stopped by the threats of Baghdad on termination of cooperation and the application of sanctions against them.

Proven oil reserves of Kurdish autonomy are 45 billion barrels, which is almost equal to reserves of Libya (47 billion barrels) and account for nearly one-third of the total oil reserves of Iraq. The main deposits are Atroush and Touke, which are located in the area of Sulaymaniyah.

It can be assumed that the reason for such interest in Kurdish oil is a more simplified environment for foreign investors. Unlike Baghdad, which requires a higher price for the contracts and often undersupplies agreed amount of oil, the Kurdish administration, interested in strengthening of the economic power, yet agrees on less favorable terms.

On the other hand, moving away from Baghdad, the oil companies present the central government with a fait accompli that they can easily give up Iraq's oil if they want.

Another question is how the Kurdish autonomy plans to export crude oil extracted by foreign companies. If earlier oil from this territory was exported through pipelines belonging to Baghdad, after the refusal of autonomy to supply oil, Kurdish administration is forced to seek alternative routes of supply of products.

Along with oil, the area of Kurdish autonomy is rich in gas. Natural gas reserves are estimated at 2.83 trillion cubic meters, accounting for about 89 percent of all of Iraq. Natural gas from the territory of Kurdish autonomy was considered as a source for filling the Nabucco pipeline, designed to ensure diversification of supply and energy security of Europe.

Given the fact that Kurdish autonomy is landlocked, the only option for the export of energy resources is a territory of Turkey. Thus, Ankara, which has recently emerged as one of the most important oil transport corridor, is only interested in cooperation with the Kurdish autonomy in this regard.

Ankara, getting the right to transport oil and gas from the territory of Kurdish autonomy, will consolidate its role as an energy hub. This, apparently, is one of the main objectives of Turkey, which, not having its own hydrocarbon reserves will be able to control the Kurdish autonomy, and use it for its own internal and external interests.

Turkey, which already imports oil from Kurdish autonomy may subsequently export it to Europe, using its infrastructure. In the longer term construction of a new pipeline is also possible. This question has already been discussed between Turkey and Kurdish autonomy.

This fact is also confirmed by recent statements by Turkish Prime Minister Recep Tayyip Erdogan, who said that Turkey would not allow to create a Kurdish state in northern Syria, considering such formation a terrorist.

If we consider that the creation of a Kurdish state in northern Syria would open to Kurdish autonomy access to the Mediterranean Sea and ensure its export abilities, then we can understand Ankara's desire to keep Kurdish autonomy in Iraq in blockade and dependent from Turkey position.