Turkish state oil company TPAO won contracts to develop two gas fields in Iraq, aiding Ankara's ambitions to become an energy bridge between Europe and the Middle East. Turkey will invest some $3.2 billion to develop the Mansuriyah field near the Iranian border alongside Kuwait Energy Company and South Korea's Kogas, and the southern Siba field with Kuwait Energy, Turkey's energy minister said.
The winners of Wednesday's auction will have to brave violence and political uncertainty to build infrastructure and pipelines for the gas which Iraq wants used for domestic consumption, but there is potential for export later.
WHY IS TURKEY INTERESTED IN IRAQI GAS?
Before the 1991 Gulf War, Iraq was Turkey's second biggest trading partner after Germany, so in many ways Ankara is only seeking to regain ground lost during 20 years of sanctions, war and instability in its southern neighbour. Despite the global economic woes, the Turkish government predicts its economy will grow by 6.8 percent this year, among the fastest in the world, so Turkey needs to increase its oil and gas supplies to keep pace with that growth.
Gaining early access to Iraqi gas, should put Turkey in a better position to import gas from Iraq once the sector becomes more mature.
While Baghdad wants the gas for domestic use for now, Thamir al-Ghadhban, a top adviser to Iraqi Prime Minister Nurial-Maliki, said on the sidelines of the auction: "I don't see a problem in the future with exporting gas."
Beyond its burgeoning domestic needs, Turkey has ambitions to become a regional energy hub. Turkey sees Iraq as the only eastern neighbour with "tangible near-time gas export growth potential," IHS senior Middle East Energy analyst Samuel Ciszuk wrote in a note on Thursday.
Other neighbours face even greater problems, including sanctions on Iran and the difficulty of finding a solution to the Caspian Sea maritime border dispute to unlock potential large-scale Turkmen gas exports westwards, he said.
WHY IS TURKEY AN INCREASING GAS HUB?
While it has scarcely any oil and gas reserves of its own, Turkey is seeking to leverage its geographical position between Europe, the Middle East, Central Asia and Russia to link energy producers and consumers with a web of pipelines.
Turkey already gets Russian natural gas through the Blue Stream pipeline under the Black Sea, another pipeline through the Balkans, and gas from links from Azerbaijan and Iran. Adding Iraqi gas would also strengthen the economic case for the proposed Nabucco pipeline connecting Turkey with Europe and easing European dependence on Russian gas supplies.
"Nabucco is very important for us," said TPAO vice president Besim Sisman after the Iraq gas auction.
WHO ARE TURKEY'S EXISTING PARTNERS?
Turkey is supposed to import 10 billion cubic metres of gas from Iran each year -- one third of its total consumption. Russia supplies up to 16 bcm a year via Blue Stream and another 14 bcm from a pipeline through Romania and Bulgaria, according to data from Turkey's state gas company Botas.
It also receives some 6.6 bcm through the South Caucasus pipeline from Azerbaijan, via Georgia and smaller quantities of liquefied natural gas (LNG) from Algeria and Nigeria.
Turkey re-exports a small amount of gas to Greece which could then be linked to a proposed pipeline to Italy, but the big prize for Turkey is Nabucco, a project that also has the backing of the European Union.
The Nabucco consortium, whose shareholders include Hungary's MOL, Romania's Transgaz, Bulgaria's Bulgargaz, Turkey's Botas, Germany's RWE and Austria's OMV, aims to build a pipeline with 31 bcm capacity.
The shareholders opted against linking the project to Iran due to international sanctions, hence the importance of securing Iraqi gas for the $11 billion project.
HAVE SANCTIONS AFFECTED TURKEY'S GAS TRADE WITH IRAN?
The sanctions target companies involved in the trade of crude products such as gasoline and diesel with Iran, so gas exports to Turkey -- Tehran's only gas export market – are unaffected.
Iran holds the second-largest gas reserves in the world and Turkey has repeatedly said it supports the idea of using Iranian gas for the Nabucco pipeline, but due to sanctions the European Union has reacted coolly to the idea.
Some analysts say additional infrastructure between Turkey and Iran, such as a planned 110 million cubic metre gas pipeline, would add muscle to Turkey's proposals.
But so far Iran has not always managed to fulfil its export commitments to Turkey and supplies have been hobbled by cold weather, disputes over prices and explosions in the pipeline.