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Soran University
Faculty of Engineering
Chemical ENG. Department

Outlook on Production Capacity of Oil and Gas in

Kurdistan Region-Iraq

Petroleum & Properties

Aso Sardar Kanabi

1. Introduction
While oil and gas discoveries in what is now the Kurdistan Region of Iraq date back to the 1920s,
it wasn’t until the first independents started arriving in the mid-2000s that the region’s
hydrocarbons industry got off the ground. Under the guidance of the Kurdistan Regional
Government (KRG), Ministry of Natural Resources and Minister Dr. Ashti Hawrami, the oil and
gas industry in the Kurdistan Region was soon able to attract the world’s major international
operators, starting with ExxonMobil in 2011, followed by Chevron, Gazprom and Total one year
later. From 2014 to 2016, oil and gas development was held back by the arrival of Islamic State,
the drop in oil prices, provisions for internally displaced people and the cut-off of budget payments
from Baghdad, which together put a strain on the KRG’s budget and its ability to pay oil
companies. However, 2017 has seen a dramatic shift in the Kurdistan Region’s oil and gas
prospects, chiefly driven by the entrance of oil giant Rosneft. The Russian company has signed on
to take operatorship of five blocks as well as the Kurdistan Crude Export Pipeline, pledging
investments in the billions. This influx of funds has allowed the KRG to settle debts with IOCs,
who in turn are ramping up development. Rosneft also plans a gas export pipeline to meet demand
from an expected gas boom in the Kurdistan Region, and has signed a 20-year deal for crude
purchases. Conflict with Baghdad resulting from September 2017’s independence referendum
created uncertainty but the KRG has remained steadfast in its payments to operators and Rosneft
has voiced unwavering determination to pursue its game-changing investments. Since 2017,
Rosneft has spent $400mn on five exploration blocks and $1.2bn on advance crude purchases. It
has also bought a 60pc stake in the KRG's oil export pipeline for $1.8mn, injecting cash and
legitimacy into the energy sector at a vulnerable time. Natural gas prospects for the Kurdistan
Region of Iraq look better than they have for several years. Production is up, a new gas pipeline to
Turkey is planned and the region's energy ministry claims it start gas exports in 2020.

Figure 1. Kurdistan oil production forecast for the top five companies. Source: Rystad Energy UCUBE.

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2. Oil Production
Kurdistan’s oil and gas sector is suffering from the combination of low oil prices and export-related
doubts concerning the time it is taking to get major field developments under way.
The companies developing Kurdistan’s oil and gas resources have to cope not only with the
massive decline in oil prices, which characterized the last year or so, but also with the prospect of,
at worst, a prolonged continuation of low prices or, at best, the prospect of oil price volatility that
might boost immediate revenues from time to time but which would still serve as a deterrent to
long-term investment.

List of International Oil Companies in Iraqi Kurdistan

The following is a list of International Oil Companies (IOCs) operating in Iraqi Kurdistan under
licences granted by the Kurdistan Regional Government's Ministry of Natural Resources in Erbil:
Austria: OMV, Canada: Groundstar Resources, Niko Resources, Shamaran Petroleum, Talisman
Energy, Vast Exploration, WesternZagros, China: Addax Petroleum, Hungary: MOL, India:
Reliance Industries, Norway: DNO International, Papua New Guinea: Oil Search, Russia:
Gazprom, South Korea: Korea National Oil Company, Turkey: Dogan Enerji, Genel Energy,
Petoil, United Arab Emirates: Abu Dhabi National Energy Company (TAQA), United
Kingdom: Afren, Gulf Keystone Petroleum, Perenco, Sterling Energy, United States: Aspect
Energy, Chevron, Hess, Hunt Petroleum, Murphy Oil Corporation.
Name of Kurdistan Oil Fields: (Bai Hassan, Khurmala Dome, Taq Taq, Tawke, Ain Zalah,
Khalakan, Demir Dagh, Shaikan, Sarsang, Sarqala, Khor Mor, Atrush).

Figure 2. Kurdistan oil production forecast up to 2035. Source: MN Rreports; Wood Mackenzie; author’s estimates

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3. Oil Production
Kurdistan wants to become a gas exporter as well as an oil exporter, and it has a willing partner
close at hand:Turkey. In November 2013, the KRG signed a binding gas supply agreement with
Turkey, which envisaged exports starting in 2017 at a rate of 4 bcm/y, then climbing to 10 bcm/y
by 2020 and eventually moving to 20 bcm/y. At this stage, the major driver for such exports was
the natural desire of the Anglo-Turkish Genel Energy, as operator of Kurdistan’s biggest gas fields,
Miran and Bina Bawi, to monetize its assets and the opportunities afforded by the fact that Turkey
had the fastest growing gas market in Europe and that additional gas would be particularly required
in the industrial and merchant centers of south-central Turkey around the ports of Mersin and
Iskenderun and a string of cities from Antalya to Diyarbakir.
What now drives the project is quite different. Turkey started to undertake serious efforts to
diversify gas imports when its relations with Russia, which routinely supplies between 50 and 60
percent of its gas, became strained as a result of Russia’s role in the Syria conflict, and also by
Moscow’s apparent decision to place the planned new Turkish Stream gas pipeline on the back
burner, if not to cancel it altogether. In its strategic plan for 2015-19, presented in the second half
of 2015, Turkey’s Ministry of Energy and Natural Resources set a new target limiting the amount
that any single supplier should deliver to the Turkish market at 50 percent by the end of 2019. In
practice, given the anticipated increase of Turkish demand from around 50 bcm in 2015 to around
60 bcm in 2020, this would have frozen the level of Russian gas supplies to Turkey at around 27-
30 bcm/y.

Figure 3. Kurdistan gas production and demand. Source: MNR reports; Wood Mackenzie; author’s calculations.

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4. References
4.1. Book References
Zedalis, R. J. (2012). Oil and gas in the disputed Kurdish territories: jurisprudence, regional
minorities, and natural resources in a federal system. London: Routledge.
Abul-Failat, Y., & Lazem, A. (2014). Oil and gas law: statute book. London: Dunya Publishing
Limited.

4.2. Web References

Kurdistan Region of Iraq. Retrieved September 30, 2020, from
https://theenergyyear.com/market/kurdistan-region-of-iraq/
List of International Oil Companies in Iraqi Kurdistan. Retrieved September 30, 2020, from
https://www.iraq-businessnews.com/list-of-international-oil-companies-in-iraqi-kurdistan/
Russia aids Kurdistan gas boost. (2019, February 26). Retrieved September 30, 2020, from
https://www.petroleum-economist.com/articles/upstream/exploration-production/2019/russia-
aids-kurdistan-gas-boost
Fathallah, H. (2015, September 29). The Future of Kurdistan's Oil Sector. Retrieved September
30, 2020, from https://carnegieendowment.org/sada/61436