Turkey last week strengthened its energy ties with Iraq by renewing a contract to import Iraqi oil to the Turkish Mediterranean Sea port of Ceyhan, where Azerbaijani oil also arrives via the Baku-Tbilisi-Ceyhan (BTC) pipeline. Earlier this year, it was announced that Iraq will export between 5 billion and 10 billion cubic meters per year of natural gas to Turkey for inclusion in the Nabucco pipeline carrying the fuel to Europe.
The oil will come from Kirkuk in Iraqi Kurdistan, along the route of the already existing 1,000 kilometer Kirkuk-Ceyhan oil pipeline. The pipeline, built in the late 1970s, consists of two trunks, with a combined design capacity of 1.6 million barrels per day, or more than half as much again as the BTC's design capacity.
The Kirkuk-Ceyhan pipeline was mainly empty from 2003, after the US overthrow of Saddam Hussein, until late 2007, and it has since been the target of disruptive attacks (most recently last November), besides suffering general disrepair as a result of the prewar UN sanctions and subsequent collateral damage. The German firm Siemens modernized the line in 2003 under the supervision of the Turkish firm BOTAS. Since re-entering service, it has operated at roughly one-sixth to, more recently, one-third of project capacity, when it has not been shut down for one or another reason.
Negotiations between Iraq and Turkey began last year, and agreement was reached after Turkish Energy Minister Taner Yildiz earlier this month expressed his wish to go ahead. Yildiz agreed with Iraq's deputy oil minister, Ahmad Al Shamma, concerning some changes to the existing contract, which expires at the end of this month. In particular, new transit taxes were agreed and provisions set for possible renovation, rebuilding or re-routing of the line.
The new Iraqi throughput from Kirkuk comes hard on the heels of the announcement three weeks ago that Turkish state firm TPAO is negotiating with the Iraq Southern Oil Company to drill 45 wells in the southern Rumaila oil field. That contract, which could be signed as early as this autumn, according to MEED, a business intelligence website, is worth US$318 million. The work would seek to almost treble field output to 2.8 million barrels per day, from 1 million.
Expansion of the Kirkuk-Ceyhan oil pipeline fits in with recently announced Turkish strategic plans to turn Ceyhan into a fully integrated oil hub over the next five years. Andalou News Agency reported on Tuesday that the country also intends to begin construction of a nuclear power plant by 2014, in addition to diversifying natural gas suppliers and raising the proportion of domestic-sourced power generation.
The government stated its intention to reduce its heavy dependence on Russian natural gas (due largely to the Blue Stream project, carrying gas from across the Black Sea to Turkey) while also constructing coal-fired and hydroelectric power plants to meet projected increases in domestic demand. That intention could be comprised, depending upon the conditions that Ankara allows to be set, upon construction and management of the gas storage facilities that Gazprom is building near Lake Tuz in central Anatolia. (See Iran claim clouds Turkey's energy goals, Asia Times Online, November 6, 2009).
Still, Turkey's announced plans would signify its intention not to be a consumer country for any of the gas transiting its territory from Russia through the projected "Blue Stream Two" project. They explain why, when Turkish Prime Minister Recep Tayyip Erdogan met Russian Prime Minister Vladimir Putin in Sochi 12 months ago, he argued strongly in favor of transforming Blue Stream Two into what is now called MedStream.
MedStream refers to a plan to conduct gas from Russia, after it crosses Anatolia from the Black Sea to Ceyhan, underneath the Mediterranean Sea to Ashkelon in Israel, with the cooperation of French companies.
It was once envisaged that gas from northern Iraq might be a candidate for re-export by Turkey along a MedStream route, before that gas became committed earlier this year to the European Nabucco project. The Russian gas might, after reaching Israel, go to South Asia by tanker, either through the Suez Canal or from the Gulf of Aqaba through the Red Sea and the Bab-el-Mandeb Strait between Eritrea/Djibouti and Yemen.