Landing in Erbil (Hewler), capital of the Kurdistan region of Iraq, one of the first things that strikes the visitor is the role of Turkey. Western oil executives and Iranian traders are prominent, but Turkish businesses, visitors, engineering and construction companies, restaurants and products are ubiquitous. Kurdistan's energy resources make it an important economic and strategic partner for Turkey in the region, but also involve Ankara in the complexities of intra-Iraq politics.
A complicated three-way chess game is being played out here between Erbil, Baghdad and Ankara. Yet even the pieces on this chessboard--Iraqi, Kurdish and Turkish politicians, western oil companies, and ordinary Iraqis--have their own agendas. Outside powers such as Iran and the US are also watching the game carefully, perhaps even moving pieces of their own. Turkey has a lot to gain from engaging with the Kurdistan region, and can improve its own energy security, particularly in the area of gas. Nevertheless, it also has major longterm interests in the rest of Iraq, and has to play carefully to avoid compromising these.
Meanwhile, Erbil is seeking to use its oil and gas to secure its own economic future and political autonomy from Baghdad. Given the realities of politics and geography, this makes it dependent on Turkey for export routes.
Kurdistan: An Emerging Hydrocarbon Power
Kurdistan's oil and gas reserves are relatively modest compared to those of "federal" Iraq (the country excluding the autonomous Kurdish region). Federal Iraq's reserves are put at 143 billion barrels (bbl) of oil, the fifth largest in the world (and likely to grow further, to 200 billion barrels or more), and 127 trillion cubic feet (Tcf) of gas (12th largest in the world, but also likely to increase).
By contrast, the Iraqi Kurds hope to find some 30-60 billion bbl; excluding the Kirkuk field, which remains in disputed territory, they currently have some 12 billion bbl of oil and 22 Tcf of gas. Amongst the largest fields so far are the Shaikan field with potential for 3.3 billion bbl of oil reserves, Bardarash with 1.2 billion bbl, and Khor Mor and Chemchemal with some 10 Tcf of gas between them. The most advanced in development are DNO's Tawke field (771 million bbl in reserves), Taq Taq (647 million bbl) held by the Turkish company Genel, and Khor Mor which is supplying gas to local power stations. (1)
Although the Kurdish region's oil resources are only a tenth or so of Iraq's total, this is still highly significant in the context of a population of almost 5 million. Current discovered resources are probably larger than the reserves of OPEC member Ecuador (population 15 million) or major exporter Azerbaijan (9 million). The Kurdistan Regional Government (KRG) plans to reach a production capacity of 1 million barrels per day (bpd) by 2016, (2) also larger than Ecuador or Azerbaijan. This would generate revenues of around $35 billion per year at current oil prices, (3) compared to the current Kurdish share of the national budget which amounts to around $12 billion. This does indicate that Kurdistan's oil and gas could be the foundation for a viable economy.
These resources have largely been discovered since 2005 by a variety of international oil companies (IOCs), initially small but now joined by several large IOCs. The Kurdistan Ministry of Natural Resources (MNR), under Minister Ashti Hawrami, has carefully selected its partners to give a wide variety of representation, including Turkish, European, Canadian, American, Chinese, Indian, Russian, Emirati and other companies. Not all have been successful, and some have withdrawn, including the Korean National Oil Company and India's Reliance, but the overall geological success rate has been impressive.
One dramatic difference between Kurdistan and the rest of Iraq is in the provision of electricity. Kurdistan has some 650 MW of hydroelectric capacity, but it has augmented this in recent years with gas-fired power plants contracted with independent power producers (IPPs), and now has almost 24-hour electricity. By contrast, generation in the rest of Iraq has expanded too slowly to keep up with demand, and grid electricity is available for only some 8-12 hours per day, depending on the province and season. …