Crude Oil Begins to Flow to Turkey from Northern Iraq after Tough Negotiations

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Researched by Industrial Info Resources (Sugar Land, Texas)--Crude oil has begun to flow to Turkey from northern Iraq, following long and tough negotiations between three governments, according to Turkey's Energy Minister Taner Yildiz.

"It will not be exported without the consent of the Iraqi government," Yildiz said in a news conference last week. "This oil is not being shipped to European markets yet. I hope to start sending the oil coming from the north of Iraq to the world market after reaching an agreement this month."

Turkey will receive 300,000 barrels per day (BBL/d), which will increase to 400,000 BBL/d, by pipeline, Yildiz said. The oil will be stored at Ceyhan.

With an annual energy import bill of more than $60 billion, Turkey wants to diversify energy supplies in order to reduce its oil and gas dependence on Russia and Iran.

The autonomous Kurdish Regional Government of northern Iraq (KRG) has built a 300,000-BBL/d pipeline that ties it to Iraq's Kirkuk-Ceyhan pipeline at the border of Turkey.

Turkey has set up the Turkish Energy Company (TEC), a state-backed entity, which has struck a partnership deal with Exxon Mobil (NYSE:XOM) (Houston, Texas). TEC will be Turkey's counterpart in dealing with northern Iraq's KRG.

Yildiz visited Baghdad in December for talks with Iraq's Deputy Prime Minister, Hussain al-Shahristani, who has long opposed Turkey's courtship of the Kurdish region. Genel Energy, an Anglo-Turkish energy company listed on the London Stock Exchange, already has extensive oil and gas interests in the region.

The Turkish-KRG deal also has significance for major oil companies. The KRG has struck deals with ExxonMobil, Chevron Corporation (NYSE:CVX) (San Ramon, California) and Total S.A. (NYSE:TOT) (Paris, France) to develop oil sites.

Baghdad says Kurdish efforts toward oil independence could lead to the break-up of Iraq, but Turkey has repeatedly said it respects Iraq's sensitivities regarding territorial integrity, and that increasing oil revenues will help the whole of the country.

The International Energy Agency forecasts that Iraq's oil production will double to 6.1 million BBL/d by 2020.

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