May 17, 2009 / 9:27 AM / in 8 years

SNAP ANALYSIS: Iraqi Kurdistan to export gas to Europe, Turkey

5 Min Read

DUBAI (Reuters) - A consortium of companies from the United Arab Emirates and Europe plan to export enough gas from the Kurdish region of northern Iraq to supply the first phase of the Nabucco pipeline to Europe.

The exports would help Europe in its quest to diversify energy supplies away from Russia.

Following are some of the potential consequences of the plan:

Europe, Russia and Energy Security

* Iraqi Kurdistan gas would give Europe a source from Iraq through Turkey, away from Russia and its immediate sphere of influence. Europe relies on Russia for a quarter of its natural gas supplies. A cut-off in Russian supplies to Europe last winter due to a dispute with Ukraine left thousands without heating and added urgency to Europe's search for more sources.

* Russia opposes the Nabucco pipeline plan and is developing the rival South Stream project. It signed deals with partners on Friday to accelerate the scheme. Moscow has rebuked the United States and former Soviet satellite nations for backing the rival Nabucco plan.

* Russia is Turkey's largest trade partner. Turkey is Russia's third-largest gas consumer. A 26-year gas supply deal between the two expires in 2012 and both agreed to work on extending the deal on Saturday.

Turkey, Europe and Iraq's Kurdistan Region

* Turkey would gain bargaining power in its quest to become a member of the European Union as a transit country and facilitator of gas exports from Iraq. Due to its geographical position straddling the Middle East, Central Asia and Europe, Turkey sees its potential for being a strategic energy partner as one of its strongest arguments for accession to Europe.

* The pipeline would increase interdependence between the Iraqi Kurdistan region and Turkey. This may have implications for the 25-year Kurdish separatist conflict in the largely Kurdish area of southeastern Turkey, long a source of regional instability and a hindrance to Ankara's EU membership quest.

* As the transit country for gas supplies to Europe, Turkey would also gain leverage over Iraq's Kurdistan region.

* Gas exports from the Kurdish Regional Government in Iraq to the Turkish market would make Turkey dependent on energy supplied by the Iraqi Kurds.

* Exports from Iraq's Kurdistan region could help meet Turkey's gas needs and remove a potential obstacle to Nabucco. Around 1 billion cubic feet per day (cfd) could go to the Turkish market from the consortium project in Kurdistan. That is more than the 15 percent of Nabucco's 3 billion cfd that Turkey wanted for its own market.

Iraq's Kurdistan Region, Nabucco

* Gas exports would thrust the semi-autonomous Kurdistan region of Iraq onto the international energy supply stage. The region plans to make its first foray into the world energy market with exports of crude through Iraq's northern oil export pipeline to Turkey in June.

* The project could pave the way to future, larger exports from northern Iraq to Europe, Turkey and other nearby states with gas needs.

* The region's oil and gas reserves were little explored under Saddam Hussein and are potentially larger than estimated. The UAE's Crescent Petroleum is confident it can pump over 3 billion cfd for many years. Around half of that would be available for the Nabucco project, enough to fill the first phase of the pipeline.

Baghdad, Oil Firms

* Baghdad's oil ministry declined to comment on the Kurdistan gas plan on Sunday. Iraq's oil ministry has clashed repeatedly with the Kurdish Regional Government over control of the country's oil and gas reserves and could oppose the deal, which has no federal approval. The oil ministry has criticized oil and gas contracts the KRG has signed with international oil companies, calling them illegal. The disagreement goes to the heart of political differences in Iraq over central versus regional control over the world's third largest oil reserves.

* Baghdad has blacklisted firms that have signed deals with the KRG. This has kept the world's biggest energy firms away from the Kurdistan region but left opportunities for those less concerned about Baghdad's opprobrium.

Iran

* Iran has long expressed its desire to become a major player in the world gas export market and has said it wanted to be a supplier to the Nabucco project. The pipeline would still need more gas, so Iran could join the Kurdistan region in the future.

* But European buyers do not see Iran as a reliable potential source of gas. European companies have halted investment plans there due to political pressure and sanctions from the United States and the United Nations over Iran's nuclear programme.

Reporting by Simon Webb; Editing by Thomas Atkins and Alex Richardson

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