[Premium] Turkish Transit Grid Reaches Iraqi Border

Work on extending Turkey's gas transit grid to the Iraqi border has been completed, opening the possibility of Iraqi gas exports to Turkey, a source close to the issue has told NGW.

The source confirmed that Turkey's state gas importer and pipeline operator Botas has completed the 40-inch pipeline last month and begun testing. Botas said three years ago that it was starting work to extend its existing transmission grid in southeast Turkey from Mardin through Midyat, Idil and Cizre to Silopi, which takes it adjacent to the Iraqi border.

Work was delayed by an upsurge in violence in the region in late 2015-2016 which has now subsided.

Although the line was announced as being designed for regional gas transmission to those districts, and is expected initially to be used for just that, it was constructed using 40-in pipe, giving it a theoretical capacity of around 20bn m³/yr, which would only make technical and economic sense if it was to be used for imports.

However the source cautioned that despite Turkey having long shown interest in importing Iraqi gas there are unlikely to be any moves to actual negotiations in the immediate future, pointing out that impending general elections in Iraq May 12 and in Turkey on June 24th effectively preclude any serious talks being started before the results are clear and new administrations formed.

This process could be lengthy in the case of Turkey which is transitioning from a parliamentary system to an executive presidency in an election in which the incumbent, Tayyip Erdogan, is expected to be re-elected but current indications are that his party may lose its majority in parliament.

The situation is further complicated by the fact that the gas reserves most likely to be available for export to Turkey lie in the semi autonomous Kurdistan region which last year voted in a referendum to declare full independence from Iraq.

Both Ankara and Baghdad strongly oppose this: after the referendum, the Kurdistan Regional Government (KRG) came under intense political and military pressure to back down, losing control of Iraq's Kirkuk oil fields in the process.

With Ankara now enjoying common cause with Baghdad, there appears little likelihood of Turkey allowing any gas transit from the region into Turkey without the approval of the Iraqi central government, a situation which appears likely to preclude export under previous agreements between Ankara and the KRG.

These include a deal signed in 2012 under which Turkey's state oil company Turkiye Petrolleri was awarded rights to two blocks in the region thought to hold gas and the right to export production back to Turkey; and a gas purchase agreement between Turkish company Siyah Kalem and the KRG for which the company was awarded a licence to import 3.2bn m³/yr from unnamed fields. Neither of them has shown any signs of progress.

The same cannot be said for plans by Anglo-Turkish upstream operator Genel Enerji to export gas from the estimated 238bn m³ reserves in the Miran and Bina Bawi fields to which it holds rights.

Genel last year concluded production sharing and gas lifting agreements with the KRG. However development is unlikely to progress unless these agreements are renegotiated and approved by Baghdad and export contracts secured which could underpin the necessary $2-3bn investment required for field development, and building a processing plan to sweeten the gas and a pipeline to the Turkish border.

Plans do exist for a 30bn m³/yr capacity pipeline as part of a deal signed last year between the KRG and Rosneft which would see the Russian oil giant develop a number of new oil fields and construct oil transit infrastructure and the gas pipeline.

Those plans too though would it appears, now have to be approved by Baghdad, or a new project launched, a process which could take some time. All of which makes Turkey's new pipeline to the Iraqi border appear somewhat speculative. This situation too though may change.

The full implications of the move this week by the US to end approval of the Iran nuclear deal and re-impose sanctions have yet to become apparent. Under the previous sanctions regime Turkey was allowed to continue to import up to 9.6bn m³/yr of Iranian gas, a waiver the US might not be minded to repeat. 

If not Ankara may view the need to fill its new pipeline link with Iraq as being a more urgent priority.