Difficult days awaiting Turkey on energy

The Islamic State of Iraq and the Levant (ISIL), or Islamic State (IS) with its new name, has taken 17 percent of Iraq’s oil reserves under its control according to the latest estimates.

After capturing Mosul and seizing Iraq’s biggest oil refinery Beiji with a capacity of the daily production of 70,000 barrels of oil, the IS is continuing its moves regarding energy resources in Syria, too.
The IS had recently declared its control over the al-Omar field with a daily 75,000 barrel oil capacity.

Oil fields of Rakka and Deir ez-Zor have already been in the hands of IS for months. Meanwhile, it is important to recall that it has also seized Mansuriyat al-Jabal, which has gas reserves and is an hour’s drive from Baghdad.

In short, the IS seems to have assumed a place on the Middle Eastern scene as a player that knows how to play the energy card well.

I asked about the IS’ unstoppable grip over energy resources to Mehmet Öğütçü, the CEO of London-based Global Resources. Öğütçü is also a nonexecutive director of Genel Energy which is active in northern Iraq.

The IS’ energy moves are well calculated, target-oriented steps, according to Öğütçü.

“The first move was to seize the oil and gas reserves in Syria’s east. And then it captured Mosul’s oil, the oil pipeline infrastructure and finally the biggest refinery in the north,” he said, adding the IS has been also taking all of the villages on the shores of Euphrates river under control in a way to prove that it is aware of the strategic importance of water.

Energy, water and finances have been the IS’ priorities so far.

And let’s talk about finance issue shortly. Following the capture of $429 million from the Mosul Central Bank, the IS is estimated to be running $2 billion worth of assets.

Öğütçü is guessing that after consolidating the borders, the IS might transfer governance to “acceptable” Sunni politicians. As to the future of energy, this is what he said:

“I do not think Iraq’s present production and export numbers will be affected very negatively in the short term due to the current IS crisis. The real problem will arise on reaching the target of 10 million barrels by 2020, because it will become harder to attract $450 billion-investment required for such a production explosion.” Turkey, the U.S., Iran and Saudi Arabia’s presence in Iraq’s energy equation will continue for a long time, according to Öğütçü’s estimates.

The energy issue is an intriguing one.

While Iran and Iraq are at odds due to Sunni-Shiite contention, their decision to act against Saudi Arabia within OPEC is still on the table.

“In the recent past, we had never seen a period with such interaction between energy and geopolitics.

Tense days are waiting for us in this area; days where conflicts, rather than cooperation, will prevail,” said Öğütçü. This is his advice on how Turkey, which is highly dependent on the outside world, should face the challenges in such an unstable environment:

“As an active player, Turkey needs to read the international energy market on which it has an excessive dependence well. And while also setting the rules of the game, it should make the necessary decisions without delay. First and foremost, it has to develop an integrated energy administration system.”