Gas is vital for the future

By Chris Bowers (British consul general in Erbil), Rudaw.net:

Let me start by asking a question: why is gas less talked about than oil in Iraq? I am not sure why this is the case but it does seem to be true. In fact, the development of Kurdistan’s huge gas reserves is vital to energy security in Kurdistan, Iraq, the region and beyond. I am proud to say that UK energy companies are playing an important role in this.

Kurdistan is blessed twofold on gas: firstly on reserves, and secondly in its proximity to growing markets for that gas; markets that won’t wait. There is a growing and urgent demand for gas-powered electricity in Kurdistan’s neighbouring provinces. Iraqi gas should, of course, first be used to satisfy domestic demand and is great to see KRG reaching out to neighbouring provinces. This is an excellent example of Kurdish and Arab interests coinciding exactly and to the benefit of everyone.

Once domestic demand is sated, the second and growing market is Turkey. Turkey’s booming economy needs a significant amount of extra power every year.  Naturally, much of that can be fuelled by Iraqi gas from Kurdistan.

Cementing the recent progress on Turkey-Kurdistan relations through deepened energy co-operation makes obvious strategic and more importantly economic and business sense. Turkey is a great market for Kurdistan and Europe as a whole has an interest in Turkey sustaining its strong economic growth.

But, Europe also has a broad interest in Iraqi gas from Kurdistan. There is a gas shortage in Europe and the gap between supply and demand is likely to increase in the long run. Gas is better for the climate than coal, is less costly initially than most forms of renewable energy and less controversial than nuclear.

Ensuring energy security is a strategic challenge for Europe, and the continent is committed to opening up a southern corridor to increase diversity, and hence, security of supply. The planned ‘Nabucco’ pipeline, which could take Kurdish gas into the heart of Europe, is an obvious option.

All of this is obvious from a market and industry perspective. Let’s hope, though, that politics don’t get in the way.

Much of this good news depends on Iraqi politicians finally passing the legislation necessary to put the hydrocarbons industry on a sounder legal footing. The draft legislation on hydrocarbons and revenue-sharing has been in limbo for far too long. It is time to get it sorted, as we say in Britain. Our understanding is that the gap between the various parties is relatively narrow. For a country dependent on hydrocarbon exports to the extent Iraq is, it makes no sense to play politics with such important legislation. Of course, it has to be right and well-drafted.

It is hard to see what can be holding up the legislation, and whose interests delay serves. Certainly not the Iraqi people. Needless to say exporting gas from Kurdistan would lead to potentially huge revenues, billions of dollars, to Iraq.

On the upside, passing the legislation would be a welcome sign that, whatever the state of the government, the Iraqi body politic is capable of passing much needed laws that are good for the investment climate in Iraq; a sign of progress and unity.

We in the UK will certainly be pushing for that in the weeks and months that come.

* Chris Bowers is British consul general in Erbil.