ERBIL, Kurdistan Region – Kurdish Prime Minister Nechirvan Barzani said that total Rosneft investment in the Kurdistan Region is possibly around $3 billion after signing a preliminary Memorandum of Understanding with the Russian oil giant.
The agreement signed last week in St. Petersburg will not come into effect for another at least three months, after it is ratified by the Kurdish government, he explained. During that time, the two sides will enter negotiations to put the final touches on the oil and gas agreement aimed at increasing oil exports to up to 1 million barrels. The deal also touches on exploration and extraction of oil at five blocks in the Kurdistan Region.
Barzani made the revelations speaking at a press conference on Tuesday evening after he returned from Russia where his government signed what he called “an initial agreement, a Memorandum of Understanding” with Rosneft ahead of a meeting with Russian President Vladimir Putin in St. Petersburg on Friday.
“It was signed as a Memorandum of Understanding, but this is an understanding that possibly is more than 200-pages long and needs very careful [study] and it may take three to four months before we can say that it will come into effect, because it takes time,” Barzani said.
He complained of a “meaningless campaign” targeting the deal without first allowing the travelling delegation to reach home and explain its details to the Kurdish people.
Four factions in the Kurdistan parliament issued a joint statement on Saturday criticizing the agreement, saying that without the legislature’s observation, the deal should not have been signed.
The Change Movement (Gorran), Kurdistan Islamic Union (KIU, Yekgirtu), Kurdistan Islamic Group (Komal), and Kurdistan Islamic Movement (KIM) stated that they did not know the details of the agreement and what concessions may have been made on the Kurdish side.
Barzani said the deals do not need the approval of the Kurdish parliament since the Oil and Gas Council has been given authority under law to sign such agreements with energy companies.
The details of the negotiations and meetings also must be examined and approved by the Oil and Gas Council, Barzani explained.
The Council, which includes the Kurdish prime ministry, the Ministry of the Economy, and the Ministry of Natural Resources, was established by a law passed by the Kurdish parliament.
Speaking of the Rosneft agreement itself, Barzani said it has three aspects.
First, after the Ministry of Natural Resources announced in January that they were offering 22 blocks for investment, Rosneft showed willingness to take part and “has chosen five blocks,” Barzani said. He did not provide details about the locations of the five blocks and did not rule out areas defined as disputed under the Iraqi constitution, claimed by both Baghdad and Erbil but largely under the control of the Kurdish Peshmerga.
Second, he said the Kurdish oil pipeline cannot cope with a planned increase of oil production, expected to reach 1 million barrels per day.
“Rosneft will develop the energy infrastructure in Kurdistan... We are able now to export 700,000 barrels abroad. The Kurdistan pipeline cannot export more than that,” Barzani explained. “That is why you need to invest in it so that you can develop it."
Rosneft will help with increasing the capacity of the existing pipeline to Turkey’s Ceyhan port, he added.
Barzani said that they had missed a self-appointed deadline to reach 1 million barrel of oil per day by 2015 because of the war against ISIS, which began in late 2014 and was followed by a pullout of oil companies and an influx of refugees.
“According to our plan, if we reach that amount of oil, they are able to export it,” Barzani said of the Russian company.
Third, he said that the Memorandum of Understanding and a pre-finance deal signed earlier in February has set a precedent. This is the first time Erbil is selling oil to a company linked to a government.
“We have been selling oil so far to oil dealers,” Barzani said. “This is the first time we sell oil to a company who has 50 percent of its shares belonging to a government. This company will take the oil to their refineries in Germany.”
He said the deal shows renewed investor interest in Kurdish oil and gas after “three years of continued economic recession” because of the ongoing financial crisis.
“This is very important to us because Russia, as a permanent member of the Security Council, is a big country and historically has had relations with Kurds.”
Barzani said the agreement, if finalized, could be an up to 25 year-long contract, as is the case for every other oil company wanting to invest in Kurdistan.
Asked whether the blocks Rosneft may invest in could be located in the disputed areas, Barzani said that disputed areas no longer exist.
“We no longer have disputed areas. It has been a long time that these areas have been liberated. And of course these areas have never been disputed areas. They are the Kurdistan Region and have been liberated by the blood of the martyrs and the Peshmerga. Any talk on this issue should not be like it used to be some years ago. I believe that Baghdad also understands this,” he said. “This has gone from our dictionary.”
The prime minister, however, said that it is a priority for Erbil to solve outstanding issues between them and Baghdad and they will seek every opportunity to do so.
On his visit to Russia, Barzani said they also discussed mutual relations, the war against ISIS, and they thanked the Russians for their role in the war against “terrorists” in Iraq and Syria.
He said his visit to the St. Petersburg International Economic Forum also had political significance. The Kurdish delegation held several meetings with Russian officials, including President Vladimir Putin, Foreign Minister Sergey Lavrov, and Energy Minister Alexander Novak.