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Iraqi Kurds pump oil to Turkey amid fears of new clash

  |   Dec. 19, 2013 at 11:23 AM
ERBIL, Iraq, Dec. 19 (UPI) -- Iraq's semiautonomous Kurdish enclave has reportedly started pumping oil direct to neighboring Turkey via a new pipeline even though Baghdad has not approved the landmark deal between the Kurds and Ankara, raising concerns of a new clash with Baghdad.

But the Financial Times said Baghdad is expected to endorse the pipeline deal in negotiations now under way with the Kurdistan Regional Government in Erbil and the Turkish government, a project that will have important geopolitical consequences for the region.

The Iraq Oil Report, a website that monitors Iraq's energy industry, reported the oil flow which began a week ago is primarily to test the pipeline. But it stressed this is "a significant step toward Kurdistan's first independent pipeline exports."

The Financial Times said Iraqi Prime Minister Nouri al-Maliki's government will likely secure 83 percent of revenues generated by KRG exports with the Kurds getting 17 percent, a split Baghdad has apparently endorsed.

The Kurds' share may seem risible but the KRG can expect to earn billions of dollars in revenue from the oil and gas exports to Turkey that are likely to follow, along with significant investment that will provide a strong economic base for a future independent state.

Maliki fears once Kurdistan establishes a firm economic base, the Kurds will declare independence, which would in turn encourage other restive regions to break away from Baghdad's control.

Baghdad's worst nightmare is that south Iraq, where more than 60 percent of Iraq's oil reserves of 144 billion barrels is located, would seek greater autonomy, critically weakening central government

The new pipeline will have the capacity to carry 1 million barrels per day to world markets via Turkey's Mediterranean terminal at Ceyhan. The initial Kurdish target is about 300,000 bpd. A second oil line is planned.

Kurdistan contains oil reserves estimated at 45 billion barrels, about the volume Britain has pumped from the North Sea since the 1970s, plus gas reserves of around 110 trillion cubic feet. Iraq's overall oil reserves, including those in Kurdistan, total 144 billion barrels.

Erbil, despite Baghdad's protestations, has signed exploration and production deals with several major oil companies, including U.S. oil companies Exxon Mobil and Chevron Corp., Gazprom Neft of Russia and Total of France.

But the new pipeline will be used to carry oil from fields operated Anglo-Turkish Genel Energy, based in Ankara and headed by former BP chief Tony Hayward, and Norway's DNO, which pioneered drilling in Kurdistan.

Genel recently listed its gas reserves in the Miran and Bina Bawi fields at 8 trillion to 18 trillion cubic feet, double earlier estimates.

Eventually, Kurdistan could be exporting 353 billion cubic feet of gas a year to Turkey through the emerging pipeline network.

There's been a lot of confusion of late regarding the $500 million pipeline operation, the first component of a network envisioned by Turkey and the KRG, and whether it would ever get under way because of Baghdad's insistence it has sole authority on energy issues.

Turkey and Erbil reportedly signed a multi-billion-dollar pipeline agreement in November, but few details have yet emerged.

The Financial Times said that the Turks have sought to downplay the significance of the new oil flow, with Energy Minister Taner Yildiz, a key figure in the pipeline plan, describing the pumping as "a test flow ... the testing will continue for a while."

"Ankara, the KRG and energy groups active in Northern Iraq have long argued that the emerging infrastructure will ultimately lead Baghdad to accede to the network of deals concerning the oil and gas that will flow into the new pipelines," said analyst Daniel Dombey, based in Istanbul.

Baghdad and the KRG have feuded bitterly for years over the Kurds' plans to independently export their oil and gas to Turkey, which is driving to become the most important energy hub between Europe and the oil and gas riches of Russia, Central Asia and the Middle East.

Turkey has no energy resources of its own, so it is seeking deals that will guarantee it supplies of oil and gas.

Also under discussion is an underwater pipeline across the eastern Mediterranean from Israel's offshore gas fields despite the current strain between the two countries, underlining the centrality of energy in Ankara's strategic policies.

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