KRG Ministry of Natural Resources

Istanbul, 31 October 2013 - Distinguished guests, ladies and gentlemen, I would like to thank the Economist for inviting me to this conference. It is always a great pleasure to be in Istanbul.

It is sadly not often that you hear good news out of Iraq. But today I want to talk about some of the advantages and opportunities created by the recently discovered energy resources of the Kurdistan Region

I believe these resources and those of the rest of Iraq will play an important role in the future energy plans of Turkey and Europe … a scenario that can create a win-win for citizens and governments alike along the energy chain.

Over the last 6 years, the Kurdistan Region of Iraq has been emerging as an important geopoliticial partner in the stability and security of our neighborhood.

The need to maintain balanced and friendly relations with all of Iraq’s neighbours has enabled us to move forward.Thanks to the discovery of the Region’s hydrocarbon resources that Iraq never knew it had, the Kurdistan Region is already in a process of rapid transition.

As a result, the KRG’s contribution to Iraq’s export targets, through the country’s northern energy corridor to Turkey and beyond, will be significant at such a time of increased international tension.

With 45 billion barrels of reserves and 3-6 tcm of potential gas resources, Kurdistan Region has been called one of the few remaining conventional oil and gas frontiers.

In recent years, Kurdistan has become one of the most actively explored hydrocarbon regions of the world, with over 25 rigs in 2012 and now close to 40 this year, compared to just 3 operating in 2008.

In the six-year period since the Region passed its oil and gas law, Kurdistan’s oil and gas have become part of the portfolio of an increasing number of international oil and gas exploration companies, with more than 50 stakeholders from 23 countries now present in the Region.

 Already, four significant oil fields are in the production stage with six more expected to come on line by the end of the year. Current production capacity lies at 300,000 bpd, rising to 400,000 by the end of the year. Most of the crude production will be destined for export, currently by trucking, then soon via pipelines. The KRG takes its share of this trade as allowed for under the production sharing contract to purchase, or barter for, refined products such as diesel and kerosene.

The Kurdistan Region continues to spend considerable sums of money each year on imports of diesel, benzene, kerosene etc to fuel power plants and factories and domestic heating.

Around 100,000 bpd of KRG crude production is currently earmarked for domestic consumption via the Region’s refineries, which is expected to increase to 200,000 bpd in the coming one to two years.

Under a formula agreed with the federal government, the Kurdistan Region is entitled to 17% of Iraq’s total refined products, plus 17% of the crude oil that is used by Iraq to supply power stations.

Export targets for crude, once the new pipeline network becomes available, are 1m bpd by the end of 2015 and 2m bpd by 2020.

The policy priority with gas is to first ensure that domestic needs are met and surplus will be available to export to Turkey and other international markets. We expect to see the first export of gas in early 2016. Turkey, quite naturally, has been the quickest to embrace the new realities of our Region.

It has built a sustainable relationship of mutual interests with the Kurdistan Regional Government (KRG), one based on trade, security and strategic co-operation. The Kurdistan Region, in this context, has proven that it can be a crucial partner to Turkey and indeed the broader international community.

With Turkey and Europe’s energy consumption expected to rise over the next few decades, it is clear that new and more diverse sources of energy are urgently required. The KRG can contribute to the long-term gas supply needs of Turkey and Europe, as a reliable alternative to the existing gas suppliers.

Export of oil and gas is not a monopoly of any single and centralized entity to be decided in Baghdad, indeed, it is our duty as Iraqis under the federal Constitution to pursue export routes for oil and gas to secure our future. And as we all know, nowhere in the world does one million barrels of oil remain stranded, and so I am confident that Kurdistan exports via pipeline will become a reality very soon.

The new export infrastructure will be a cost effective and secure solution which will enable more of Iraq’s oil and gas to reach the international market and which will enable all citizens of Iraq to benefit from increased revenues.

As many of you may know, KRG passed its own oil and gas law in 2007, which sets out the Region’s constitutional rights with respect to its oil and gas resources. As important, if not more, to Iraq’s stability and unity will be the passage of a federal revenue sharing law as set out in Article 112 of the Constitution.

Both the much-delayed federal hydrocarbon law and the revenue sharing law are Constitutional requirements and must be implemented as these are the pillars of stability and unity in Iraq. The revenue from the Kurdistan Region’s oil sales will mean a boost of billions of dollars to Iraq’s treasury. So our success in the KRG will also be Iraq’s success.

Ladies and gentlemen, since the removal of the dictatorship in 2003 and the passage into law of Iraq’s federal Constitution in 2005, the KRG has grasped the opportunity. It has been harnessing its resources and providing for the population almost continuous power, including supplying electricity to neighbouring provinces of Iraq that are in desperate need of economic development.

Our Region ensures public safety and enjoys a booming economy built on developing our oil and gas industry. Crucially, the foundations for a new sustainable partnership with our geographic neighbours are being laid.

Kurdish politicians have been working with their Arab partners in Baghdad to try to secure the foundations of Iraqi democracy. Our leaders have played a decisive role in brokering political solutions in Baghdad in order that the central government could function. It has not always been easy. There has been a long dispute with some in the national capital about our quest for economic independence. This is part of the debate with Iraq as a whole about the role and reach of a federal structure, and how to ensure reliable revenue-sharing mechanisms.

 But any reasonable analysis of Iraq’s prospects should include the possibility that the Kurdistan Region could provide a model to the rest of the country as it seeks to escape from its tragic past and its too frequently violent present.