LONDON: Russian oil major Rosneft will invest in gas pipelines in Iraq’s Kurdistan, expanding its commitment to the region ahead of its independence vote to help it become a major exporter of gas to Turkey and Europe.
Kurdistan has been exporting oil independently from the central government in Baghdad since 2014 and Kremlin-controlled Rosneft joined the list of buyers this year, lending the semi-autonomous region hundreds of millions of dollars in loans guaranteed by future oil sales.
Now Rosneft is widening its investments to gas by agreeing to fund a natural gas pipeline in Kurdistan, Rosneft and the Kurdistan Regional Government (KRG) said on Monday.
Two sources close to the deal said the investments would amount to more than $1 billion (£735.35 million).
Kurdistan is holding an independence vote on September 25 as it seeks to part ways from Baghdad after years of disputes over budget revenues and the sharing of oil exports.
Erbil, the seat of the KRG in northern Iraq, needs money to fund the fight against Islamic state and a budget crisis caused by low oil prices.
Kurdistan has relied on oil pre-finance deals to improve its fiscal position but has struggled to develop its large gas reserves, which can require more investment to develop on a longer-term scale.
The arrival of Rosneft will speed up gas development, which has so far largely been driven by mid-sized companies.
For Rosneft, the world’s largest publicly listed oil company by production, the deal is a major boost to its international gas ambitions.
Rosneft has long sought to challenge Gazprom, Russia’s gas export monopoly, in supplying gas to Europe. For Turkey, it means the arrival of new supplies for its energy-hungry economy and the potential to become a major centre for gas supplies to Europe.
The pipeline’s capacity is expected to handle up to 30 billion cubic metres of gas exports a year, in addition to supplying domestic users.— Reuters
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