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If the KRG does not resolve issues with Baghdad, soon it will lose all its crude: MIRS Interview with Shwan Zulal

Shwan Zulal
Analysis Opinion

11/11/2017 4:22:00 PM

Mediterranean Institute for Regional Studies , which is a non-governmental, non -profit institute and is dedicated to research on and about oil, natural gas and water resources, made its first interview with Shwan Zulal, fellow at Kings College whose expertise are  political risk and  energy analyst on  Kurdistan Region Iraq. He is also Managing Director at Carduchi and Associated fellow at the European Centre for Energy and Resource Security (EUCERS).

Interview by: Dana Taib Menmy 

MIRS: Dear Mr. Shwan thank you for this opportunity to make this interview with you and talk about key issues on Kurdistan Region’s oil and gas sector, as well as rapid political and economic developments in Iraq and the Middle East.

I would like to start our conversation on the issue of Kirkuk.

What about the consequences of controlling Kirkuk oil fields by the Iraqi troops; and its impacts on energy pipelines, oil prices, and the political situations in the area?

 

Shwan Zulal: Due to Loosing Kirkuk oil fields, the KRG has lost exportation of more than 300-350 bpd to Turkey.  The KRG was using the revenue of oil exportation to pay salaries, but now this income has ended. Currently, the KRG only exports about 250-280 bod into Turkey.

Before Kirkuk’s takeover by the Iraqi Federal Government, the KRG was exporting nearly 550 bpd, but it hardly was able to pay a quarter salaries to its employees. Therefore, KRG’s oil exports has minimized into more than fifty per cent, this will have grave consequences on Erbil’s ability to pay its employees. This will not have direct consequences, at least in the coming two months, because incomes from oil export are received in advance by the KRG, but afterwards the KRG will face a big deficiency in cash, and I do not believe anyone to give loans to Erbil. 

 

This will not have great impacts on the oil prices globally, since Iraq can increase exports via Basra fields. But the greatest impact of controlling Kirkuk is that Baghdad needs the KRG to export Kirkuk crude via an oil pipeline controlled by Erbil.  The pipeline, which exports crude from Kurdistan Region as well as Kirkuk fields, has been established by Kar Group. It is located within the Kurdistan Region’s territory, and it has been working properly during the last three years. Baghdad needs to reach an agreement with the KRG to use this Kurdish pipeline, until it can repair an old pipeline for exporting its own crude into the Turkish port of Jayhan, on the Mediterranean Sea.

The impact of Kirkuk’s fall to the IOCs is that some of those companies have halted their works due to security concerns, since they are do not know whether there will war or not.

 

MIRS: but Rosneft, recently has signed several other contracts with the KRG?

Shwan Zulal: I deem Rozneft’s contracts with the KRG rather political, since the company has not named the oil blocs, where it signed the contracts. Rosneft has interests in the Kurdistan Region; large amounts of current KRG crude export are shipped to Rosneft, since it paid the KRG in advance. Rosneft sees its interest in signing contracts with the KRG, rather than to wait until the oil blocks caught by Iraq’s central government, then to sign contracts with the Iraqi oil ministry. Because contracts terms and conditions are different between Erbil and Baghdad. Russia has shown that it wants to take advantage in the region’s upheaval.

 

MIRS: Concerning Iran, do you see the seizure of Kirkuk oil is in Tehran’s strategic interest; as you know Iraq and Iran previously has MOA regarding exporting Kirkuk oil into Iran via a proposed pipeline, do you see the seizure of Kirkuk is the implementation of that plan?

 

Shwan Zulal: Iran’s strategy in helping the Iraqi security forces, including the Popular Mobilization Units  (PMU), was cutting incomes from Kirkuk’s oil fields, which was the main factor for making the Kurdistan Region to hold the September 25th referendum for independence.  Previously, the KRG ministry of Natural Resources was talking about one million barrels of oil export from the Kurdistan Region oil fields, but this was untrue and after the seizure of Kirkuk it has been exposed that the KRG can only export  200, 000 bpd. Iran and other neighboring countries’ message to the Kurdistan Region is that “It is not our problem that to take oil, but when you try to use oil’s income for nation building, it is a red line for us that cannot be passed.”

 

MIRS: What is the real data of Kurdistan Region’s oil reserves?

Shwan Zulal: previously it was portrayed that the Region has an estimated 45 billion barrels of crude oil reserves, this number is untrue. I think there are no real date out there but estimates now for potential reserves ranges from anything between 10 to 40 billions,  but proven reserves according to IEA in 2012 is 4bn barrels not including Kirkuk.

 

MIRS: What are the obstacles and issues of Kurdistan’s energy sector in terms of regional and international competition, namely among Iran, Iraq, Turkey, Russia, Israel and the USA? All these countries want to strengthen its position within the region; energy equations, What Kurds should do, and how they should work in order not to be victims of superpowers and regional powers?

Shwan Zulal: Kurds have lost what they had; it is not easy to regain what is been lost. The KRG was controlling a large amount of oil, currently only half of the crude is left. If the KRG swiftly not resolve its issues with Baghdad, soon it will lose the other half of crude which now controlling. Currently, Baghdad may agree that oil contracts with the IOC to remain in hands of the KRG, but if the issues to be worsen with Baghdad, the latter may control the entire Kurdistan region’s energy sector including contracts with IOCs. This will kill the Kurdistan region’s oil sector.