KRG diplomat laments "political brinkmanship"
The troubled relationship between Baghdad and Kurdistan's regional administration must be resolved to allow all Iraqi citizens to benefit from Kurdistan's vast onshore gas resources, which could rapidly improve both economic and national climate change outcomes, given Iraq's current dependence on emissions-heavy, low economic-multiplier oil products, according to Kurdistan's high representative to the US.
KRG high representative Bayan Sami Abdul Rahman noted this goal was especially poignant for Iraq, where the constitution says natural resources must be used for public benefit, following the terror of Saddam Hussein's rule.
Rahman said: "The political problems that we are facing right now are a challenge for all of us. And for all of those who have invested in Kurdistan and Iraq's oil and gas sectors. What we are seeing is high-stakes political brinkmanship between Erbil and Baghdad, and it is unfortunate from our perspective.
"We have always looked forward to reaching a consensus with Baghdad on the way forward for the whole of Iraq. As the Iraqi constitution states, Iraq's natural resources belong to the people of Iraq."
Rahman was a guest speaker on a webinar promoting new Columbia University research on KRG's gas potential: Unlocking Natural Gas in the Iraq Kurdistan Region, sponsored by the university's Center on Global Energy Policy.
Columbia University non-resident fellow Robin Mills chaired the discussion. He was also joined by the international affairs deputy director at the US Department of Energy, Jim Jewell, and Mohammad Makkawi, managing director for Kurdistan at the region's biggest upstream gas investor, Crescent-Dana Gas.
KRG holds the majority of Iraq's discovered, non-associated gas reserves. Research findings presented by Mills indicate KRG could possess 40bn m3/yr of technical gas production capacity by the mid-2030s, with most of the gas going to the replacement of oil-based fuels, potentially saving Iraq more than 10mn mt/yr of CO2 emissions. In addition, KRG could export free gas quantities across the border to Turkey, where pipelines to southeast Europe could, in turn, help replace Russian gas supply.
The paper envisions around 10bn m3/yr of domestic gas demand would be met with KRG's resources, primarily to serve gas-fired power plants, with consumption then rising to around 15bn m3/yr in the medium to longer term. That would leave a surplus of around 25bn m3, either for export overseas or for redeployment inside Iraq to promote emerging gas-intensive industries, creating economic growth opportunities.
At present, Iraq sources most of its gas from Iran, leaving it exposed to Tehran's attempts to exert political control over its neighbour. The animosity with Tehran frequently boils over – in recent weeks, missiles have been launched into KRG's producing gas fields, with Iranian militias widely believed to be responsible. The US DoE's Jim Jewell admitted this violence made short-run operations in Kurdistan "challenging."
KRG is currently producing around 500mn ft3/d of gas, largely from Dana Gas and Crescent's Khor Mor gas concession, which yields around 450mn ft3/d of supplies. Khor Mor is also being expanded through the KM-250 project to bring output capacity to 700mn ft3/d by mid-2023, and then to 1bn ft3/d within the next few years. The project was funded by a $250mn loan from the US International Development Finance Corp.
Dana Gas's Makkawi said: "We believe within the next two-and-a-half years we will be in a position to meet the gas demand of the whole KRG region of Iraq. We will then be happy to look at exporting gas to the rest of Iraq.
"This could either mean directly exporting gas, or using power generation by lifting gas to KRG power stations and then delivering electricity to Iraq. Within the infrastructure that has been awarded, the government has backed a project to construct a complete network of large-diameter gas pipelines to connect all producers and users, and also to bring gas infrastructure all the way to the Iraq border."
Jewell believes it is vital that Erbil and Baghdad focus on creating a stable investment framework that will spur further upstream activity to unlock KRG's full gas potential. He argued all of Iraq had a vested interest in capturing KRG's gas potential, not only by exporting gas, but also through mitigating the massive gas flaring that currently occurs around the country, particularly from oil producers near cities like Basra.
"Supplying energy to either Iraq or neighbouring countries requires good stable commercial terms and a pathway to ensuring that federal Iraq, or neighbouring countries, more easily see the benefit of energy produced by companies operating in the region."
On the potential environmental benefits, the moderator Robin Mills observed restrictions on external investments into fossil fuels could prove counterproductive in Kurdistan's case. He questioned whether ESG policies contain enough leeway to reflect Iraq's specific situation, whereby gas extraction could massively reduce harmful emissions. It was a point Makkawi agreed with.
Makkawi said: "The pace of the transition differs from one place to another, depending on wealth, access to natural resources. Iraq is no different in this respect - as it stands today, by replacing other liquid fuels we are creating an enormous positive environmental impact, in terms of CO2 savings.
"Last year, we saved 5mn mt of CO2. When our expansion project comes on stream next year, we will be saving 8mn mt, already much more than produced by all the Tesla cars in operation."