Iraqi Kurdistan, feted by international petroleum companies as the last frontier for onshore oil and gas exploration, is hustling to develop energy infrastructure.
Greeters at Erbil's international airport hold signs that say it all: Weatherford, General Electric, Reliance—the vanguard of a wave of significant newcomers ready to drill wells or build pipelines, power plants and refineries.
The message for the region's oil and gas producers is that help is at hand.
That's a major turnaround from just a few years ago, when Kurdistan's pioneering oil and gas producers had to be their own drilling and haulage contractors, builders, repair men, even mine sweepers.
One of these pioneers is UAE-based Crescent Petroleum, which began producing gas in Kurdistan in late 2008.
"We encountered many difficulties when transporting more than 60,000 Mt of steel and mobilizing thousands of truckloads across the Turkish border," Crescent CEO Majid Jafar recounts.
"During the construction of the pipeline. . .we had to cross rivers, build bridges and clear minefields," he said in an interview published in The Oil and Gas Year's latest report on Iraqi Kurdistan, released May 20 in Erbil.
That was then. This is now: Installed power generation has leaped to 2,200 MW from the previous 185 MW supplied by a pair of 50-year-old hydroelectricity plants. In September 2011, General Electric signed a $200 million, 12-year deal to service the turbines of new gas-fired power plants in Kurdistan's three main cities: Erbil, Sulaymaniyah and Dohuk.
If Kurdistan has streaked ahead of the rest of Iraq in terms of power development, it still lags in pipeline and refining development. But that's about to change.
At an international energy conference in Erbil on May 20–21, Kurdistan Regional Government (KRG) Natural Resources Minister Ashti Hawrami outlined plans for twin pipelines to carry separate streams of light and heavy crude as far the Turkish border, enabling the KRG to meet its oil export targets of 1 million b/d in 2014 and 2 million b/d by 2019, and the Turks to control the quality of northern Iraqi crude exports from their Ceyan terminal.
Current crude output capacity is about 250,000 b/d, with local refineries taking 60,000 b/d. Kurdistan's crude exports via Iraq's federally operated northern export pipeline from Kirkuk peaked at 181,000 b/d before the KRG suspended them on April 1, claiming Baghdad owed $1.5 billion in overdue payments for Kurdish crude.
The KRG is now reviewing offers to build its new pipelines through territory it controls, Hawrami said. A network of feeder lines within Kurdistan to transport oil from new fields is also planned.
Moreover, a strategic initiative to build a gas pipeline to the Turkish border is moving ahead, with Ankara's full approval and cooperation.
"We are looking at monetizing [gas] beyond the region. We have looked at building power plants to supply power to the rest of Iraq. Beyond that, as much as 70% needs to find its way to the international market, and the biggest market in Europe for us is Turkey," Hawrami told Oil and Gas Year.
Turkey, depending heavily on imports from Russia and Iran, is desperate to broaden its gas supplies to increase their reliability and lower costs, so the KRG export agenda has warmed Ankara/Erbil relations.
On May 20 in Erbil, Turkish energy minister Taner Yildiz, KRG President Massoud Barzani and Hawrami together pledged energy cooperation, for the first time allowing the KRG to plan direct oil and gas exports.
"With 91 Tcf of recoverable gas resources, the region has the potential to become a key supplier," Oil and Gas Year reported. "The KRG envisions the role of a strategic interdependency with Turkey, paving the way to enhanced relations with Ankara."
Aydin Selcen, Turkey's consul general in Erbil, told the Turkish publication that Kurdistan's contribution to Turkish oil and gas supplies would be important to his country: "There could be an LNG terminal on Turkey's eastern Mediterranean coast and more traditional pipelines carrying gas could be connected to Turkey for both export to Western markets and for internal consumption."
Meanwhile, Baghdad continues to label KRG production-sharing contracts "illegal" while blacklisting foreign signatories to such deals, but bankers are buying Kurdistan's oil and gas story.
"The financial markets' view of Kurdistan has evolved significantly over the past two or three years," Tony Hayward, CEO of Anglo-Turkish Genel Energy, said in an Oil and Gas Year panel discussion. "The key is deciding exactly what infrastructure is needed. . .Financing is not going to be an obstacle."
Meanwhile, the KRG is also hastening to expand refining capacity, not least to thwart threats from Baghdad to stop supplying petroleum products to Kurdistan.
Tasmin Carlisle
Platts
