E&P activity in Kurdistan region/Iraq and energy policy

EUCERS Executive Energy Seminar

Shwan Zulal 17 June 2013 Consultant

Executive Summer Institute

17 21 June 2013
Changes and Challenges in International Energy Markets
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Global Trends and Kurdistan Region/Iraq emergence as an energy player

Highlight the importance of geopolitics in the new emerging oil and gas frontiers. Discuss various trends and oil and gas Reserves and production figures from Iraq and Kurdistan. An overview of the oil discoverers and production challenges as well as political dispute between the regional government and central government and how oil affecting the political dynamics of the region

Identify factors and conditions (un) favourable to sustained large-scale oil exports from the KRG
Assess the potential effects of key political and geopolitical drivers shaping short- and medium-term export prospects

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Global Hydrocarbon market Overview

The middle east has nearly 60 % of the worlds proven oil reserves, therefore for many year to come, oil will be the subject of discussions because whenever we talk about development, growth, security and politics, oil and energy plays a crucial role. 2012 average oil prices were the highest ever since oil was discovered and are likely to remain so, despite dramatic developments affecting international oil markets; 1. The US is set to become the largest oil producer before the end of this decade surpassing Saudi Arabia. 2.China is already becoming the biggest oil importer and India will follow suit, 3.Increase in Iraqi output and exports, which is nearly balancing the fall in Iranian sales. 4.Growth of oil consumption in the Middle East and Africa 5.And the anxiety over Middle East oil supplies, ie the effects of the Arab Spring, which have increased political uncertainty throughout the region. 6. Kurdistan Region emergence as an energy player in the region

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Iraq ethnic diversity

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Possible supplier of gas to EU

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Oil evacuation routes

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New Pipelines in Kurdistan Region

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Iraq oil production

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Iraqs position on the gas map, the country can potentially provide a cost effective gas
IEA

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Oil may help reduce shortfall by 2015! But gas fired generation will need replace it otherwise cost will be immense IEA

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Investments needed annually

IEA

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New strategic vision for the country set to create 10m jobs and spend $600bn on investment as well as bringing in a revenue of $6tn by 2035 IEA chart

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Companies operating in Iraq, who are the winner?

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Despite its effective autonomy, KRGs landlocked location leaves large-scale oil exports contingent upon cooperative relations with Baghdad and turkey, both of which have incentives to constrain it. Tumultuous national/regional politics pose additional potential challenges to uninterrupted exports.

Baghdad controls existing pipelines; payment dispute leaves KRG to export by truck; approaching elections threaten to heighten tensions Turkeyprincipal source of imports and natural export corridorenjoys substantial leverage; PKK issue significantly shapes relations with KRG Ties to other Kurdish populations expose KRG to regional instability and fallout from growing regional Sunni-Shia divide

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TURKISH POLITICS: Priority of resolving PKK issue may weigh against short-term action on KRGTurkish pipeline, but success would favour an expansion of ties potentially including some form of economic union Turkish energy security and diversification needs in light of regional sectarian cold war. Turkey currently largely dependant on Iranian/Russian/Azerbaijan gas to power its economy, a dependant KRG can provide good source of diversification.
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SYRIA: Collapse of the Assad regime has the potential to generate significant regional instability with direct implications. Intervention from Iran threatens to widen the hostilities & underscores the sectarian cast of civil war- Sunni-Shia tensions in Iraq. Syrian Kurds secured control of their region while remaining out of the conflict; An independent Syrian Kurdish region could lessen Turkish willingness to support a KRG pipeline.

IRAQI POLITICS Malikis drive to centralize power diminishes prospects of breaking the oil impasse or seeing leadership change through 2014 election. Increasing sectarian tensions and constraints on its access to the Ceyhan pipeline are likely to push KRG towards assertion of greater autonomy and development of dedicated pipeline through Turkey or use of Ceyhan separately from Baghdad (selling directly bypassing Baghdad)

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Thank you
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Risk Management Monitoring Service Bespoke service Due Diligence

Contact: Kurdistan Region/Iraq: +964 (0)7708620986 London +44 (0)2082400824 Mobile +44 (0)7882933905 contact@carduchi.com

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