Major Kurdish Oil Pipeline To Be Taken Under Control By Russia’s Rosneft

The role of the Russian energy major Rosneft as the main international investor in the semi-autonomous region has been further boosted after the oil major agreed to take control of the main oil pipeline in Iraq’s Kurdistan.

President Vladimir Putin has a strategy to ratchet up Moscow’s political and economic influence in the Middle East and the latest move by the country’s oil major is an apparent part of that broader strategy of Putin. After Kurdistan held an independence referendum last month, the region’s relations with the central government in Baghdad has erupted and gone bad and this decision by the Russian government came amid that crisis between Kurdistan and Baghdad’s government.

With the current pipeline operator KAR Group potentially retaining about 40 percent of the project, Rosneft has said that its share in the project may total as much as 60 percent.

Rosneft’s overall total investment in the project was seen totaling about $1.8 billion, reported the local media quoting sources familiar with the deal.

It has been several years now that Kurdistan built its own new infrastructure to the Turkish Mediterranean port of Ceyhan which had resulted in an old oil pipeline being out of operation since that time. Recently, the Iraqi government in Baghdad had threatened that it would re-route a big chunk of oil flows towards the old oil pipeline and the announcement of the deal comes days after Baghdad’s that threat.

Trading houses Vitol, Petraco, Glencore and most recently Rosneft via pre-financing deals are the main lifters of the oil there.

Kurshish authorities and Baghdad have to resolve their differences by themselves, said Rosneft’s influential Chief Executive Officer Igor Sechin on Thursday.

In the wake of last month’s referendum, a pledge to isolate Kurdistan has been taken by Iraq, along with neighboring Iran and Turkey.

The revival of an old pipeline to Turkey to deprive Erbil of a big chunk of oil revenues and the cutting off air and banking ties are included in that plan of isolation.

Baghdad has a target of boosting its capacity by a third to 950,000 barrels per day and Rosneft will be investing in expanding Erbil’s independent pipeline, which Baghdad has targeted. The total targeted oil production capacity of Baghdad is the equivalent of about 1 percent of total global supply.

The Kremlin oil major effectively becomes a controlling stakeholder in Kurdish oil infrastructure because it Rosneft would be acquiring 60 percent in the project. And as Erbil faces unprecedented pressure from its neighbors, that majority stake of the Kremlin oil major should give Erbil some sense of security.

An investment of $400 million in five oil blocks in Iraqi Kurdistan has already been agreed to be made by Rosneft.

It is seeking to help Erbil build two major oil and gas pipelines and has also previously loaned Kurdistan $1.2 billion, guaranteed by oil sales.

(Adapted from CNBC)


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