KRG Gas Export to Turkey in 2016

KRG Gas Export to Turkey in 2016KRG Gas Export to Turkey in 2016

The Kurdistan Regional Government plans to start building a natural gas pipeline next month to export fuel to Turkey, a project that would bring the self-governed region closer to economic independence.

The link will transport gas from Khor Mor and Chamchamal fields in northern Iraq’s Kurdish enclave, first to Turkey and later to Europe, Bewar Al-Khinsi, an economic adviser to the KRG, said in a phone interview with Bloomberg. "The KRG will begin shipping 10 billion cubic meters a year by the end of 2016 and double the volume to 20 billion by 2020," he said.

“The pipeline will be a source of revenue for the KRG and a step to help Turkey overcome a gas crisis that may arise” as a result of the nation’s soured relations with Russia, a historically important provider of gas for the Turks, he said.

The KRG is struggling to pay its bills, including money owed to foreign energy companies such as DNO ASA and Genel Energy Plc.

The collapse of crude prices is straining KRG finances at a time when the regional government must also pay the cost of fighting the self-styled Islamic State militants that control much of northern Iraq.

   Huge Hydrocarbon Deposits

The Kurdish region could hold as much as 5.6 trillion cubic meters of natural gas reserves, more than Algeria or Nigeria, data from BP Plc show. Kurdish reserves represent about 3% of the world’s total deposits, according to the website of the KRG Ministry of Natural Resources.

The region also holds 45 billion barrels of crude oil reserves—equivalent to almost a third of those in the rest of Iraq, according to BP data. Turkey offers the sole route to market for the expanding Kurdish oil industry.

Turkey will help pay for the 831-kilometer network, which will run parallel to an existing oil pipeline. The 181-kilometer section inside Kurdish territory will cost an estimated $750 million.

The project is the result of an agreement that the KRG and Turkey reached in 2013 to build two pipelines, one for oil and another for gas. It would position the Kurdish region as an alternative supplier of gas to the import-dependent Turks.

Turkey relies on imports for almost all of its fossil-fuel needs, with half of its gas coming from Russia. Turkish officials have sought to secure alternative sources of energy since its forces shot down a Russian warplane in the border region with Syria, triggering a deterioration in relations.