Energy moves in northern Iraq

While the Middle East once again is experiencing some of the most turbulent days in its history, we are witnessing brave moves in the region in the name of energy. One such move occurred recently when the Turkish-British partnership Genel Energy PLC increased its share of the Miran field, one of the most important natural gas reserves in northern Iraq, to 51 percent.

According to the head of the executive committee of Genel Energy, Mehmet Sepil, the Miran field, where his company has invested $450 million, is one of the largest natural gas fields explored to date in Iraq. Before we go on to explore how this latest move by Genel Energy opens a window of opportunity for Turkey, which is currently dependent on Russian, Iranian and Azerbaijani gas, let’s take a look at the company’s history in the region.

Mehmet Sepil has a background in the construction sector, and started doing business in northern Iraq in 2000.

“At that time, Talabani, who was at Suleymaniye, called on us to help with infrastructure development. After a while, he proposed that we buy the Taq Taq oilfields, which Saddam [Hussein] did not permit to be developed,” Sepil said.

So Sepil established the Genel Energy Company in 2002, together with Mehmet Emin Karamehmet, chief executive of Çukurova Holding, one of the shareholders of Turkcell. For 10 years, Genel Energy maintained its position as one of the biggest oil producers in northern Iraq, and in 2011, it signed a significant partnership deal, when it “married” Vallares, a company formed by the former CEO of oil giant BP, Tony Hayward, taking the name of Genel Energy PLC, with Hayward as CEO.

According to Sepil, the company, which is listed on the London Stock Exchange, has a value of $4 billion today.

Genel Energy PLC has oil and natural gas exploration licenses in seven separate areas in northern Iraq, and has recently been conducting exploration work in Morocco, Somalia, Malta and Ivory Coast as well.

I want to mention the importance for Turkey of the company’s existence in northern Iraq, which is increasing in strength. Turkey is dependent on external sources of energy and pays $54 billion for oil and natural gas annually. Every year we import 40 billion cubic meters of natural gas from Russia, Iran and Azerbaijan. According to Sepil, out of this total, it is possible that a portion of 10 to 15 billion cubic meters could come from northern Iraq, instead.

The chief economist of the Paris-based International Energy Agency, Fatih Birol, Ph.D., confirms Sepil’s statement. Iraq has the richest reserves in the world of both oil and natural gas, and it could present a good alternative to Russian, Iranian and Azeri gas for Turkey. As Birol has pointed out, oil and natural gas costs in northern Iraq are very low compared to other countries. In other words, we may pay $300 for a thousand cubic meters, rather than $400.

The window of opportunity created by northern Iraq could also strengthen Turkey’s position in negotiating with Russia, which also holds the country’s nuclear card. Genel Energy’s move is extremely important from this angle; however, there is another side to the coin. As Dr. Birol has also said, there are serious disputes regarding the sharing of the oil and natural gas revenues between the Kurdistan Regional Government in northern Iraq and the central government in Baghdad.

“The dispute is so deep that it obstructs the development of oil and natural gas fields,” Birol said. As he prepares to publish a comprehensive report next October about the energy potential of Iraq, Birol has advised Ankara to advance its energy strategy toward this country.