Rosneft in the Kurdish Region: Moscow's Balancing Act

All of these point to further political and business agreements that need to be made, including a deal that Rosneft would sign with Iraq’s Oil Ministry for the resumption of Kirkuk oil exports. Production at Kirkuk’s fields is currently being re-directed to refineries across Iraq, including those in the KRI and in some cases production has stopped.

In the gas space, Rosneft is to participate in funding, around USD 1bn, in the construction of a natural gas export pipeline to Turkey. The plans are to initially supply the local market, then export to Turkey and ultimately to Europe. The capacity is significant at 30 billion cubic meters annually (BCMA) which are equal to 6% of total European gas demand. It would be logical that it would have similar dynamics to the oil pipeline, in that Rosneft would have at least 60% control as well as a similar share in tariff charges.

Currently, the KRI’s gas comes from Pearl Petroleum operated Khor Mor field at 3.1 BCMA and associated gas from Khurmala Dome at 1 BCMA, both going to local power generation. The economic rationale for the proposed gas pipeline would come from (1) the expanded production at these two fields adding 2 BCMA and 1 BCMA respectively; and (2) primarily from developing Genel’s Miran and Bina Bawi fields.

The challenge though is that both producing gas fields are within the disputed territories while Genel lacks the financial resources to develop its promising fields without attracting partners into the project. It’s logical to conclude that Rosneft could very well be one of the partners that would work with Genel to develop these fields.

This could dovetail with the 2011 pipeline deal to export Iranian gas to Europe via Iraq and Syria which initially had a capacity 40 BCMA. Given Russia’s main role in any future settlement in Syria, it is conceivable that this could be routed through Turkey further cementing Russia’s relationships with Turkey and Iran which grew significantly over the last two years.

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