Iraq seeks to cash in on its gas

BAGHDAD, Jan. 21 (UPI) -- Iraq is seeking to exploit its vast natural gas reserves, a resource that has had to play second fiddle to the country's oil wealth, and has signed a strategic energy agreement with the European Union to develop the gas fields.

But just as Iraq's drive to develop its major oil fields and quadruple production through a chain of multibillion-dollar contracts with international oil companies could be set back by an upsurge of violence surrounding national elections slated for March 7, so too could Baghdad's ambitions for its gas reserves.

The Europeans are desperate to break their dependence on Russia for their gas supplies, which Moscow has a habit of turning off during the winter.

Having Iraqi gas flow through the planned 2,000-mile Nabucco pipeline that would funnel gas westward from Central Asia and the Middle East through Turkey, Iraq's northern neighbor, to Austria, would forge a strong energy link between Europe and Iraq.

"Iraq represents a vital link for the EU's security of supply," EU Energy Commissioner Andris Piebalgs declared during the signing ceremony in Baghdad on Monday.

Iraq has an estimated 111 trillion cubic feet of natural gas, with much, much more yet to be tapped, according to industry analysts. But as with the country's oil fields, these have never been fully explored or exploited.

Only 20 percent of Iraq's oil fields, which contain the equivalent of 115 billion barrels of oil, have been developed.

An even smaller percentage of Iraq's gas reserves have been developed. But the infrastructure is so neglected that large amounts of gas produced in the oil fields are flared off rather than being stored or utilized through domestic consumption.

The Baghdad government has yet to disclose its plans for developing Iraq's gas reserves.

But it would presumably entail securing agreements with international energy companies to do that, as has been done with a dozen or so of the country's major oil fields over recent months.

Last summer Prime Minister Nouri al-Maliki offered to supply Nabucco, the EU's flagship project for the development of the so-called Southern Corridor energy route bypassing Russia, with 15 billion cubic meters of gas a year from 2015.

That would have the support of U.S. President Barack Obama's administration as Nabucco would cut out Russia and Iran from the energy contest.

It would also boost U.S. efforts to isolate Iran's economy and force it to curb its controversial nuclear program.

Monday's agreement with the EU also envisions an Energy Action Program for 2010-15 -- which jibes with the timeframe mentioned by Maliki -- covering energy efficiency, energy demand management and renewables.

The EU said it was also ready to help Iraq produce a national gas development plan, develop its electricity grid and "identify sources and supply routes for gas from Iraq to the European Union."

Turkey, which has long had ambitions to become the regional energy hub linking Europe to the huge energy reserves of the Caspian Basin and Central Asia, already takes oil from Iraq's northern Kirkuk fields through twin pipelines terminating at the Mediterranean port of Ceyhan.

Northern Iraq is believed to contain sizeable gas reserves, which could be transported to gas terminals in Turkey and then pumped to Europe.

Iraq has for some time also been examining the possibility of developing the Western Akkaz gas field, which could feed European customers through neighboring Syria.

Oil Minister Hussain al-Shahristani said in 2008 that Akkaz "has five wells that are ready to be interconnected and provide the Syrian market with approximately 50 million cubic feet per day of Iraq gas."

The Middle East Economic Survey, a weekly energy newsletter published in Cyprus, says that Akkaz could also feed 450 million cubic feet of natural gas per day to the planned Nabucco system.

There is a catch, though: Akkaz is located in western Anbar province, a flashpoint in the insurgency led by al-Qaida, and is thus extremely vulnerable to terrorist attack.