The latest developments in Kurdish-Russian relations might be indicative of even deeper cooperation and convergence between the 2 nations.
The latest developments in Kurdish-Russian relations might be indicative of even deeper cooperation and convergence between the 2 nations, as new petroleum deals will inevitably have political ramifications. Rosneft and Gazprom Neft seem very intent on increasing their presence in Kurdistan, with the former walking an extra mile by venturing into Kurdistan's infrastructure segment.
The KRG (Kurdistan Regional Government)-Rosneft pre-payment deal, signed this February, has successfully laid the groundwork for future rapprochement.
Under the conditions of the deal, Rosneft is reported to prepay $1 billion to the Kurdistani government in advance payments in return for Kurdish crude supplies for the next 3 years.
The 1st Kurdish cargo has already been delivered
in April by Rosneft's trading arm to Trieste, from where it was pumped up to Rosneft's minority-owned German refineries.
The recently held St. Petersburg Economic Summit brought along a new Rosneft-KRG deal, this time granting Rosneft access to E&P assets within Iraqi Kurdistan (the Russian company signed a preliminary PSA contract for unspecified 5 exploration blocks), as well as transportation infrastructure.
is also bound to gain access to the main conduit of Kurdish exports, the Kirkuk-Ceyhan pipeline, for expanding the pipeline's capacity from the current 700 000 bpd to 1 000 000 bpd.
Albeit not made explicit, the Kurdish government might be also interested in foreign assistance in linking the region's southern fields (including the Gazprom Neft-controlled Garmian block) to the existing transportation infrastructure, as currently these are deprived of pumping oil directly towards Ceyhan.
It is not only Rosneft which wants to increase its foothold in Kurdistan, but also Gazprom Neft.
As opposed to Rosneft, Gazprom Neft
is already present in Kurdistan, acting as an operator in 3 blocks in Southern Kurdistan.
The Garmian field has been refurbished so as to allow for a swift production ramp-up in the next few years, as the company expects a hike from the current 10 000 bpd to 25 000 bpd by 2020.
The other 2 fields, Halabja and Shakal are expected to be brought onstream in 2018.
Gazprom Neft might be granted new licences in so-called disputed territories, recently reconquered by the Kurds from IS, possibly even the undeveloped 280 Mmboe Qamar field or other adjoining blocks.
Kurdistan, according to current estimates, holds 40-45 billion barrels of oil and in case the current territorial control structure remains intact, this might increase even further as one would also include the Kirkuk Area.
Moreover, Iraqi Kurdistan is also rich in gas, with the KRG estimating its 3P gas reserves at 5.67 TCm.
Kurdistan's gas sector is significantly underdeveloped
, also from the infrastructure point of view - even accounting for a stable rise in domestic consumption with gas gradually replacing oil in power-generation units.
Erbil would have 10-15 BCm surplus production to export by the early-2020s.
Russian companies have so far been quite prudent in investing in gas projects abroad, however, the Rosneft communique does, in fact, mention that the strategic cooperation
might move towards the gas sector, too.
As surplus Kurdish gas is most likely to be marketed in Turkey, it would make sense for Russian companies to get involved to hedge against possible roadblocks with regard to TurkStream.
Refining might be another direction in which the Russian and Kurdish side might be interested in Kurdistan's 2 relatively large refineries, Kalak and Bazian (both owned by Kurdish companies), ought to be modernized and expanded so as to satisfy Iraqi Kurdistan's increasing gasoline and diesel needs, which are supplied from Turkish refineries.
The Regional Government has recently brought up the subject of constructing 3 new refineries, yet so far the initiative made little headway.
Erbil has so far carefully trodden its path towards gradual recognition by leading international powers and it is unlikely to change course anytime soon.
In this, it needs support from Russia, United States, Turkey and many other regional actors.
The independence referendum set for September 25 will fortify Kurdistan's bargaining positions vis-à-vis Baghdad and strengthen KRG's hold over its oil & gas dealings.
In this vein, the recent rapprochement between Iraqi Kurdistan and Russia
seems to break new ground - not only are the Russian companies significantly bigger than the ones currently present in Kurdistan with the notable exception of ExxonMobil, they also bring a new element, government backing.
Sounds like a win-win situation.