The Kurdistan regional government (KRG) is moving towards the completion of the pipeline by the third quarter of the year, sources in the Turkish oil sector told Reuters. The line will link the Taq Taq oilfield, which is run by the Anglo-Turkish oil company Genel Energy, with a pipeline connecting Iraq to Turkey.
Turkey has given the green light to the plan which will allow oil to pass through Taq Taq field to the Kirkuk-Ceyhan pipeline at the Fish Khabur pumping station in Iraq, close to the Turkish border. Oil will flow directly to the Turkish port of Ceyhan before being shipped to world markets.
This step will help Kurdistan increase its oil exports significantly, but will probably upset Iraq’s central government in Baghdad, which considers unauthorized direct exports from Iraq’s Kurdish provinces illegal, and says that the growth in commercial transactions between Kurdistan and Turkey is a threat to the unity of Iraq.
Concerned about the disputes between Baghdad and the semi-independent region of Kurdistan, the US has urged for the passage of a law ensuring the regulation of the oil sector nation-wide. Washington hopes that this step will prevent a confrontation that has been escalating since the complete withdrawal of US forces in December 2011.
According to sources, the new pipeline was originally designed to transport natural gas, but Kurdistan’s minister of energy, Ashti Hawrami, said that the new pipeline will now be used for oil. Genel Energy reportedly plans to begin exporting oil via the pipeline in 2014, though the company declined to comment on the issue.
According to sources, the pipeline, which is under construction by a Turkish contractor, is 80 percent complete and will transport 300,000 barrels per day when opened.
Kurdistan’s crude oil used to be transported to world markets by a pipeline controlled by Baghdad. However, exports via this route stopped last year after a dispute over payments, while oil shipments from the Taq Taq field are currently trucked into Turkey.
Baghdad said that it alone has the authority to authorize exports and signing contracts with oil companies, while the KRG insists that it also has this right under Iraq’s constitution.
Iraq’s Prime Minister, Nouri Al-Maliki, softened his tone last week saying that Iraq welcomes any step taken in the direction of rapprochement with Turkey on the basis of common interests, mutual respect and good neighborliness.
However, sources maintain that hoping for reconciliation might be tested again when the new pipeline begins to operate and the matter of how to distribute revenues between Kurdistan and Baghdad becomes more urgent.
“I believe that this requires an agreement between Turkey, Kurdistan and Baghdad ,” one source said.
“Where will the money of oil export be spent? And who will sell the oil pumped in Ceyhan? . . . There need a written agreement.”
Turkey said that it can play a major role in solving the dispute over payments between Iraq’s central government and Kurdistan. Turkey’s oil minister, Taner Yildiz, said earlier this month that Turkey is ready to support an agreement under which Baghdad gets 83% of the oil revenues and Turkey gets the remaining 17%.
Another Turkish official said: “Turkey respects the sensitivities of Baghdad and Erbil and aims to help both parties get their shares of oil revenues as set in the constitution.” Another Turkish official said that setting an insurance account in Turkey for Iraq’s oil revenues to be deposited in will be an important step in guaranteeing fair distribution.
For more than a year, the KRG has angered Baghdad by signing deals with major companies such as ExxonMobil and Chevron, which also offer more favorable conditions than in southern Iraq.