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Research Report


John Roberts
Copyright Date: Sep. 1, 2016
Published by: Atlantic Council
Pages: 34
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Table of Contents

  1. (pp. 2-2)

    In current uncertain economic, political, and security conditions, diversification of Kurdish energy markets is essential. Turkey remains by far the best export route in terms of Kurdish, regional, and European energy security, but a deterioration of security conditions inside Turkey, and particularly in southeastern Turkey, means there must be a renewed focus on ensuring the smooth development of both oil and gas exports via Turkey. This, in turn, means a focus on the resumption of talks between the Turkish government and Turkey’s own Kurdish communities. With the Turkish government focused on a purge of supposedly Gülenist elements in Turkish society...

  2. (pp. 3-7)

    The Kurdish economy has been hit by a triple whammy: the decline in oil prices; the loss of revenue due to temporary closures of the Kirkuk-Ceyhan oil pipeline; and serious problems confronting oil companies operating in the Kurdistan region—notably Gulf Keystone (GKP), which has seen the value of its shares collapse to just 1 percent of their value four years ago, and Genel Energy, which is now coping with a major downward revision to its reserve estimates. In addition, medium-term prospects for developing gas exports are threatened by the same unrest that caused a three-week outage on the Kirkuk-Ceyhan...

  3. (pp. 8-10)

    Oil receipts constitute the overwhelming majority of KRG revenues. But these have proved volatile for three main reasons: revenue-sharing disputes with the federal government in Baghdad; the fall in international oil prices; and disruption to the export pipeline carrying Kurdistan crude to the Turkish port of Ceyhan. On a more positive note, the fact that the KRI’s oil and gas resources are largely being developed by private companies operating on production sharing agreements (PSAs) has contributed to a degree of flexibility, since the companies have a significant incentive to weather the trials and tribulations besetting the region and its government....

  4. (pp. 11-14)

    For the KRG, the most important issue is the security of energy transit through, and sales to, Turkey. The overriding question is whether this can be guaranteed so long as the Turkish government remains, in effect, in a state of war within Turkey itself.

    The pipeline from Kirkuk to Ceyhan constitutes the KRG’s revenue lifeline, while its plans for further development depend largely on plans both to expand oil exports through this line and to develop a gas export program that would deliver an initial 10 billion cubic meters per year (bcm/y) to Turkey within two or three years and...

  5. (pp. 15-19)

    Kurdistan’s oil and gas sector is suffering from the combination of low oil prices and export-related doubts concerning the time it is taking to get major field developments under way.

    Plans that envisaged the region producing as much as 1 million b/d by mid-2016 have already proved overly ambitious. To achieve this target, output should have reached 865,000 b/d by the end of 2015; in practice, current capacity stands well short of that figure, while actual output in 2015 amounted to just 577,287 b/d.

    The companies developing Kurdistan’s oil and gas resources have to cope not only with the massive...

  6. (pp. 20-22)

    Kurdistan wants to become a gas exporter as well as an oil exporter, and it has a willing partner close at hand: Turkey. In November 2013, the KRG signed a binding gas supply agreement with Turkey, which envisaged exports starting in 2017 at a rate of 4 bcm/y, then climbing to 10 bcm/y by 2020 and eventually moving to 20 bcm/y. At this stage, the major driver for such exports was the natural desire of the Anglo-Turkish Genel Energy, as operator of Kurdistan’s biggest gas fields, Miran and Bina Bawi, to monetize its assets and the opportunities afforded by the...

  7. (pp. 23-24)

    Energy relations between the Kurdistan Region of Iraq and federal Iraq depend very much on three interrelated political issues. The first is whether there is a resolution to governmental paralysis in both Baghdad and Erbil; the second concerns the status of Kirkuk; the third is whether subsequent federal Iraqi and KRG administrations would have an interest in reviving the December 2014 agreement under which KRI should receive some 17 percent of federal Iraqi expenditures.

    At the time of writing, there is no indication of how the political crises in either Baghdad or Erbil will end. Iraqi Prime Minister Haider al-Abadi...

  8. (pp. 25-25)

    The KRG is exploring the possibility of exporting crude oil to Iran via a prospective 250,000 b/d pipeline from Koysinjaq, near Lake Dukan in central Kurdistan, to Kermanshah in western Iran, where it would connect with the main Iranian oil trunkline system.37 But details remain sparse and it is far from clear how the Iranians propose to square the purchase of oil from Iraqi Kurdistan with their close alliance with the federal authorities in Baghdad. In early April, the head of the KRG’s representative office in Tehran, Nazim Dabagh, referring to plans to use an existing Iranian oil pipeline, said...

  9. (pp. 26-28)

    Two issues lie at the heart of the dilemmas facing the KRG and the Kurds of northern Iraq. The first is the desire of both the KRG itself and the majority of Iraqi Kurds for an independent Kurdish state in what is now northern Iraq; the second is the security of energy exports on which the KRG relies for basic solvency. The two issues are, of course, intimately connected.

    Not one of Kurdistan’s immediate neighbors—Iran, Iraq, or Turkey—actively favors the emergence of an independent Kurdish state in what is now northern Iraq. The most that can be said...