Turkey, Iraqi Kurdistan sign landmark energy contracts

Humeyra Pamuk and Orhan Coskun
Reuters
Iraq's Kurdistan Prime Minister Nechirvan Barzani speaks to the media after voting in Arbil
View photos
Iraq's Kurdistan Prime Minister Nechirvan Barzani speaks to the media after voting in Arbil, capital of the autonomous Kurdistan region, about 350 km (217 miles) north of Baghdad, September 21, 2013. REUTERS/Thaier Al-Sudani

By Humeyra Pamuk and Orhan Coskun

ANKARA (Reuters) - Turkey and Iraqi Kurdistan signed a package of landmark contracts earlier this week that will see the semi-autonomous region's oil and gas exported via pipelines through Turkey, sources close to the deal told Reuters on Friday.

The sources said the deals were signed during Kurdistan Regional Government (KRG) Prime Minister Nechirvan Barzani's three hour-long meeting with Turkish Prime Minister Tayyip Erdogan on Wednesday.

The move is likely to further infuriate Baghdad, which claims the sole authority to manage Iraqi oil and which said late on Thursday that any energy deal with Kurdistan would be "an encroachment on the sovereignty of Iraq".

The Turkish Energy Ministry declined to comment.

Crude flow in the KRG's new pipeline will start very soon, and will link up with the 40 inch-line of the existing Kirkuk-Ceyhan pipeline to be exported to world markets.

The state-backed Turkish Energy Company (TEC), which Ankara set up to operate in northern Iraq, has also signed a contract to operate in thirteen exploration blocks, in about half of those it is teaming up with U.S. giant ExxonMobil.

The contracts also envisage the building of a new oil pipeline and a gas pipeline, aimed to help the region's oil exports to climb to 1 million bpd by 2015. The gas flow is likely to start by early 2017.

Under the deal, payments for KRG's oil will be collected in an escrow account at a Turkish state bank. Once the contractor fees are paid, the balance will remain untouched until KRG and Baghdad reach a deal on the revenue sharing.

(Reporting by Humeyra Pamuk and Orhan Coskun; Editing by Daren Butler)