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Turkey, Iraqi Kurds Make Progress on Oil Deal

Turkey, Iraqi Kurds Make Progress on Oil Deal
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Παρ, 22 Νοεμβρίου 2013 - 15:14
Turkey and the Kurdish Regional Government in northern Iraq are quickly forging ahead with a series of deals that would let the semiautonomous region start piping oil to world markets as soon as early next year. But the central government in Baghdad remains a major obstacle.
Turkey and the Kurdish Regional Government in northern Iraq are quickly forging ahead with a series of deals that would let the semiautonomous region start piping oil to world markets as soon as early next year. But the central government in Baghdad remains a major obstacle.

The Ankara government is preparing to set up an escrow account at a state-owned Turkish bank to collect proceeds of KRG energy sales, officials said Thursday at the Atlantic Council Energy & Economic Summit here.

The move, of which the first tangible details emerged at the conference, would solve the main problem Iraqi Kurds face in cashing in on their abundant energy resources: paying firms ranging from energy giants Exxon Mobil Corp. and Chevron Corp. to wildcatters like Genel Energy PLC, the Turkish company listed in London and run by former BP PLC chief Tony Hayward.

"Out of the proceeds of the payments from the sales, the contractors will get their share of compensation," KRG Energy Minister Ashti Hawrami said at a panel. "We are not planning to touch the net revenue, which is net of contractors and transportation costs."

Sharing the proceeds of energy sales has been a sticking point between Iraq 's central government and the Kurds. The parliament in Baghdad has repeatedly failed to adopt an oil-and-gas law, as well as a revenue-sharing law, which would settle the disputes caused by the Iraqi constitution.

A fast resolution still looks difficult. The central government maintains that Baghdad alone has the authority to handle Iraqi energy contracts and exports, while Kurds say the national charter gives them exploration, production and sales rights as long as they adhere to an agreement that sees the KRG take 17% of the total national proceeds, with Baghdad getting the rest.

An Iraqi government official in Baghdad said Thursday that the central government continued to press Turkey to facilitate Kurdish exports through Iraq 's State Oil Marketing Organization.

Baghdad also is unlikely to agree to an escrow account to house the Kurdish region's energy-sales proceeds, the Iraqi official said. Turkish Energy Minister Taner Yildiz had said that while negotiations are ongoing, there was no final agreement with the central government yet.

"I don't think we have the ability to bring about a consensus for promulgating an oil-and-gas law, and a revenue-sharing agreement, two things that are essential to keeping Iraq together," said Adnan al-Janabi, chairman of the Iraqi parliament's oil-and-gas committee.

Mr. Hawrami said the Kurds wouldn't touch their net revenue until they hammered out a deal with the central government whereby the profits could be merged with gains from all Iraqi oil shares and then redistributed.

Despite the Kurds' assurances to Baghdad , one of the chief drivers of investor appetite for northern Iraq 's resources has been the KRG's unyielding push for more autonomy and improving ties with energy-thirsty Turkey .

Aside from the payment mechanism, which energy executives described as a leap forward, the KRG's push to lure international investors to develop its oil and gas fields also involved building a pipeline to carry crude into Turkey . Mr. Hawrami said the project is undergoing final tests, and shipments can start within the first three months of 2014.

"Kurdistan is on the verge of becoming a major world exporter of oil, first, and then gas," Mr. Hayward of Genel said at a panel. "For me, the future is bright."

Turkey's Mr. Yildiz met his Iraqi counterpart, Hussein al-Shahristani, at an October summit in South Korea. On Thursday, Mr. Yildiz said he broached the idea of the escrow account to Mr. Shahristani for the first time last month.

During the Istanbul conference, officials from Turkey, the KRG and the U.S. went to great lengths to stress that any deal would be for the greater good of Iraq, and not pose a threat to Baghdad.

"Contracts with northern Iraq and the profits that result from that, the oil that will flow, all the Iraqi people have a claim to that. Therefore, if we're parking this money in a state-owned bank, we will definitely share the receipt with the central government of Iraq," Mr. Yildiz said during a news conference on the sidelines of the summit.

Until recently, the U.S. had resisted a KRG-Turkey deal for fear of antagonizing Baghdad and pushing its Shiite prime minister closer to Iran. But the progress has Washington's tone shifting.

"We support the discussions, and companies being engaged, within the constitutional structure," U.S. Energy Secretary Ernest Moniz said in response to The Wall Street Journal's questions during a briefing at the summit. "Minister Yildiz--from my understanding--had a very, very good meeting with Iraqi Minister Shahristani. We hope those discussions will converge quickly."

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