Five tankers crossed the border from the KRG into Turkey in July, marking the first exchange of oil or gas between the two governments. The trade was just a harbinger of a bigger hydrocarbon trading relationship between them, according to a recent report in Reuters. For Turkey, the KRG represents a new source of oil and gas imports, to which Turkey has long been addicted. For the KRG, the opportunity to trade with Turkey is a way of flaunting its independence from Baghdad and demonstrating the value of its resources.
It’s not a one-way trade. At the end of August, Turkey also started shipping refined fuels to the KRG to fuel its power plants. Though the KRG is allocated 140,000 barrels per day (bpd) of fuel from the central Iraqi government, it only receives 15,000 bpd, according to sources in the Reuters article.
For now, Turkey is only receiving condensate liquid fuel by-products from the Khor Mor gas field in the KRG. In the future, however, Turkish Energy Minister Taner Yildiz says he anticipates a potential daily inflow of 40,000 barrels from the KRG. That’s a fraction of the 600,000 barrels of oil that Turkey imports each day, but every drop counts when you’re 90 percent dependent on oil imports — as Turkey is — and scrambling to find new sources of the precious liquid.
In total, the KRG’s oil fields could produce up to 200,000 barrels per day for export, according KRG Energy Minister Ashti Hawrami.
Future oil industry expansions
The KRG currently ships oil to international markets through a pipeline controlled by the Iraqi government, extending from Baghdad to a port in Ceyhan, Turkey.
This system allows the KRG’s exports to be stalled by political disputes between the KRG and the central Iraqi government, however.. Exports were halted in April, for instance, over Baghdad’s outstanding debts to companies operating in the region. Exports may be halted again if Baghdad hasn’t paid its debts by mid-September, according to KRG officials.
By August 2013, the KRG hopes to begin exporting oil directly to the Turkish border, through a new pipeline with the capacity to transmit 1 million bpd.
Turkey’s relations with the central Iraqi government have been on the decline before now. But it certainly won’t help matters if Turkey becomes a major purchaser of oil and gas from the KRG.
Will this become another situation where Turkey’s appetite for unclean energy forces it into a dispute with its neighbors? That’s already happened over its efforts to drill for gas off the coast of Cyprus, and the destructive hydroelectric dams it has built along its eastern borders.
Read more about Turkey’s energy politics:
Turkey’s Economic Growth Hampered By Oil Addiction, Analysts Say
US Sanctions on Iran’s Oil Pressures Turkey’s Energy Supply
Turkey Begins Controversial Drilling In Cyprus
Image via Azad Lashkari/REUTERS