Rosneft expands in Iraq's Kurdistan with exploration, pipeline deals

St. Petersburg (Reuters)—Russian oil major Rosneft has agreed to explore and develop five fields in Iraq's Kurdistan as the company seeks to become a key player in one of the world's newest and fastest-growing oil provinces.

Kremlin-controlled Rosneft this year became the first oil major to pre-finance Kurdish crude exports, an activity long dominated by trading houses, which bankrolled the semi-autonomous region amid its fight against Islamic State and a budget crisis caused by low oil prices.

On Friday, Rosneft and the Kurdistan government signed production-sharing deals for five oil blocks, with Rosneft saying it would also aim to explore for gas in the future.

Igor Sechin, Rosneft chief executive and a close ally of Russian President Vladimir Putin, said the company was widening cooperation with Kurdistan following the first direct purchases of Kurdish oil for Rosneft's German refineries earlier this year.

Increased feedstock access. "The agreements...set an example of well-weighed investments in one of the key Middle East regions, which will make it possible for the company to expand its exploration and production geography, provide feedstock for Rosneft's growing refining network and raise profitability of our international assets," Mr. Sechin said.

Iraq has long opposed Kurdish independent oil sales, but has lately eased its stance amid joint efforts by the regional government and Baghdad to defeat Islamic State.

Rosneft and Kurdistan also said they had agreed on the "monetization of the export oil pipeline in Kurdistan," with Rosneft getting access to the regional transportation system, which has throughput capacity of 700 Mbpd.

By the end of 2017, Kurdistan plans to expand the pipeline to 1 MMbpd, or 1% of global output, betting on the arrival of new volumes from fresh developments.

Kurdish oil production has been mainly led in recent years by mid-sized firms, including Genel. Larger companies such as ExxonMobil and Chevron are still in the exploratory stage and have recently returned some blocks to Kurdistan after disappointing searches.

Rosneft said the deals signed would allow it to talk about "full entry in one of the most promising regions of the developing global energy market.” Kurdistan estimates its recoverable reserves at 45 Bbbl of oil and 5.66 Tm3 of gas.

(Reporting by Dmitry Zhdannikov; Editing by Dale Hudson)


From the Archive