Energy Market and the Future of the Natural Gas sector in the Kurdistan Region of Iraq


On April 13, 2022, Rudaw Research Center (RRC) held a webinar on the Energy Market and the Future of the Natural Gas sector in the Kurdistan Region of Iraq.

Oil and gas investors within companies have long argued that natural gas will be a bridge to renewable energies because it burns much cleaner (less CO2 in the exhaust) than coal and oil. BP’s latest publications have predicted a strong future for natural gas, that by 2050 it would provide 22% of primary energy in their (Rapid) future scenario, compared with 45% for renewables, gas will stay fairly constant from 2020 to 2050, while oil and coal start declining in 2025.

Furthermore, Russia’s attack on Ukraine has acquired natural gas of a value or a stronger position among different types of energy, as the European Union country seeks Russia’s replacement for natural gas and is working to avoid using Russian gas. The Kurdistan Region, which has invested in natural gas for nearly 15 years and now has about 500 million cubic feet of production, is expected to increase production to 250 million cubic feet by the beginning of next year, which gives a major position for the Kurdistan Region by the said time.

In this webinar, with the participation of the natural gas and energy experts, we discussed the following key topics:

  • The future of the energy market, especially natural gas
  • What are the challenge and opportunities for the EU towards secured natural gas?
  • What are the implications of the Russia and Ukraine war on energy (natural gas)?
  • What is the opportunity for a new supplier like Kurdistan Region in terms of natural gas nowadays?
  • Can Kurdistan region be a part of natural gas supplies in the coming years?

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Mahmood Baban: Thank you for joining us in this virtual event. Today, we are here to talk about the energy market, especially natural gas. I will start with Dr Carole Nakhle to give us a brief background on the national gas market in the world. What do the new forms look like for natural gas in the war between Russia and Ukraine?

Dr Carole Nakhle: Thank you. And yes, please be tough with me, interrupted me, because the topic is so big and there are so many things happening that I can carry on talking and I may overlook the timing so it was good to drop me. Well, first of all, thank you very much for inviting me to be with you today and to discuss such timely topics. I am not quite sure, where to start about the current price, and you’ve been following very closely what is going on in the gas market, and I use the market as plural because as you may know, we don’t have a global market for gas like oil. We have a regional market and are quite fragmented. This is changed; we come back to this point. It may be due to the gas market, and we have Regional Market nowadays. To the point issue of energy, but if I were to focus, primarily on what’s going on in Europe, in the European gas market.

I think this is where you see geopolitics with economics with whatever you want to know, what policy is all coming together? Try to come up with a solution to protect consumers and households from high prices and energy prices from negative repercussions on the economic outlook. But we have to take a step back. Now, why the invasions and the Russian invasion of Ukraine is the direct factor creating turbulence that we are seeing today in the Europe gas market? In my view, this has been amplified, and what is going on for at least the last two years, and should be some factors go back to decades. So we have to be able to distinguish between what is going on today immediately visible and gigantic factors, but also we have to understand the dynamics and that means in the making from last three years. For some factors, we have to go back years before to understand, where we are today and how we might get out of a current crisis. So, I’m going to go to the details of the war and its implications on supplies today. I want to take you back to just two different perspectives on what’s going on in Europe. You see you here, everywhere, almost everywhere people, talking about Europe’s dependence on Russia, how Europe can free itself from its reliance on Russian gas. We know that Russia is providing 40% of Europe’s gas needs, and gas is imported to EU. So, it is not insignificant, it is the largest provider. So definitely anything it has to do with Russia will impact European gas markets. However, we have to look at it differently; I don’t see a Europe as desperate situation, especially if I take the time perspective and a longer time perspective. So if I look back, for example, in the 1990s, 75 per cent of Europe’s gas imports originated from Russia. Today versus 40% per day. So already Europe is in a better position than where it was a few decades ago. And second, if you heard what the EU has announced. And if you heard What Germany has announced, saying they are going to end up their dependence on Russian gas by 2024 and they are dry to look internal to get gas, LNG from Qatar.

I would have believed this a few years ago because a year ago. There was of course Russia was always the country causing the biggest concern. But again, if you go back to even a few decades ago, you will see that. There was always a close affinity between certain countries and Russia and particularly here we’re here at distinguishing Germany, so we saw the position today when you hear them stop and the EU as a whole and individual countries taking a tougher stand on Russia. Germany suspended Nord stream2, and certification of Nord stream 2 long before the invasion of Ukraine happened. I was in place in November last year. So if you put these together, you realized the EU is speaking from a stronger position than where it was a few years ago. Then, this is largely due to the combination of policies that contain the European Union has been perusing for years now, and this has come to a certain fortune and is far from being an ideal position. But relatively speaking, the EU is in a stronger position than a few years ago, why I am saying that, because look at it, first of all, the extensive gas infrastructure that you find across the continent. It is the complete opposite of what you find here in the Middle East, which is more like a desert in terms of gas infrastructure. Also, the EU is not only looking for another supplier of pipeline gas, which there is few but there are out there. But LNG opened a completely new chapter in the gas market, and this is a factor, I mentioned in my opening remark about what has been in the making over the years that the globalization of the gas market is always still far from being close to having a global map as we have with oil. But It is happening but moving in that direction and that is primarily due to the LNG. Also, essentially as always, we have that competition between, let’s say Asia and Europe. This is the fact of markets, right?  But it provides greater flexibility, it gives you greater options, and it gives consumers perhaps a stronger position. And if you are depending only on the same, single supplier and pipeline gas, so the message I want to say here today. We should look at what’s going on in Europe, not only from Europe depends on Russia, but also the other way around because interdependency cuts both ways, and I believe that Russia needs more Europe, especially in the years to come, that the other way around that the EU needs Russia. If you just take this perspective, you can start to look at the gas market, spend the dynamic of the gas market, and the trend of the last few years to understand better the way out of the crisis, but just moving straight quickly to say a few words on the Middle East, on the side that makes this comparison between the Middle East and EU. Of course, it’s not a fair comparison. It is however, it can be said yes, they can take easy advantage of the crisis and already some country like Qatar for example has committed to sending it. Already sending more LNG tankers to Europe, but it’s not only about Qatar, the Middle East has reached its own 30% of the world’s proven reserves, but they are accountable only for 10% of global production, which there is a kind of mismatch between the actual capacity of the region versus what has been and what is being produced.  And the other thing, I’m also thinking about what there is a crisis in Europe, and people are desperate to find every cubic meter of gas. But, here in the Middle East we are still flaring natural gas, and wasting these valuable resources. So, it’s another dimension.it needs more to be done in terms of investment in the region. There is a great potential in the region waiting for investment opportunities. I would say, the outlook for natural gas investment is much better than it used to be only two years ago, not only because of higher prices, but we see how some countries including the most aggressive climate change policies adopt relations. We are seeing a reversal as an opportunity here, but this would not be a Para shout it of another country, we need to set a framework for that to happen.

Mahmood Baban: thank you, we will get back to you about Middle East capacity, now I will give a stage to Mr Robin Mills, CEO at Qamar energy please go ahead.

Robin Mills: Thank you very much Mahmood for holding this event. Thanks, Everybody. I am very glad to join you today. I’m afraid I’m not able to join with the image, but next time, you should be able to hear me. Thanks for the introduction of the Dr, Carole to the state of the global gas market today. So as you may be aware, we as a company have just completed a study of the Gas sector in the Kurdistan region and we were looking at the production potential. We were looking at the potential for domestic use and domestic requirements for gas. And then we will get the potential for sales outside the region. Now the Kurdistan region has as we know very sizable gas resources, some part of that is developed currently that’s most of the Khor Mor field, which is producing for domestic cut, using power generation. And then also associated gas from oil production mostly Khurmala field which is also being used for power generation. But there’s a great potential to expand the Region’s gas production further and to make sure firstly that all domestic uses are satisfied. So there’s a recent project, as I’m sure you’re aware to extend the current gas pipeline. That runs north up to Duhok, and in the Duhok pipeline to be able to supply that plan fully with gas and replace diesel would save on fuel bills, would save carbon emission, and also will ensure that plan can run at full capacity and so greatly improve the power generation situation in the region. Beyond that, there’s suddenly scope or some more power generation. We saw an interesting project recently had at Garmeyan area, using some Associated gas from oil fields for local power generation and then for taking more of the gas into the industry. So. Providing gas to Industries such as cement plants and other industrial facilities to improve their economics and to enable more and wider Industrial Development. So that’s all very interesting and important propositions. And we outline some of the options for that. Beyond that, there are very large continuing gas resources in the Kurdistan region. And a lot more than the region is likely to do, ever need to use itself. And this is in further developed the Khurmor field, and the development of ChamChemal field, which each could be a large resource. And, then the development of the two major fields, Miran and Binabawy fields, are technically challenging fields. They contain so-called sour gas, which has a high content of hydrogen sulfide, which is a toxic and corrosive substance. So developing those fields is technically complicated and quite expensive but they are a very large gas resource. And if they develop that would provide over one significant gas surplus for the Kurdistan region that Surplus, we think reasonably the reasonable pace of development over a few years could reach between 10 to 20 billion cubic meters per year. So we estimate the Region’s current gas demand about 5 billion cubic meters per year. That can go right to 10 billion and then you can have another 10 to 20 billion in the longer term for export. So this is a pretty substantial gas resource. Then let’s put that 10 to 20 billion cubic meters into context. So Europe, a company from Russia reports about 160 billion cubic meters of gas from Russia per year. So 10 to 20, you are talking about something that is getting up to know close to 20% or even a bit more of current Russian gas exporting into Europe. So that would be quite a significant export project. And this is attracted attention over the years for the potential to export Kurdish gas that was never the initial agreement signed in Turkey in 2013 for export gas into Turkey, and the project yet has been processed. There is also discussion about supplying gas from Kurdistan into Federal Iraq as we know Iraq suffer from serious power shortage, due to shortages of gas and electricity. It is developing some more domestic gas can still be short of sufficient gas, Imports costume around Iran. I guess. There are gas supplies, not been very reliable. But they’re often cut off. And then they’re also quite expensive. And so, there is also a good economic case for supplying gas from KRI o Iraq, and all possibilities supplying electricity. Kurdistan Region could use gases to generate electricity and then send a portion of that to Federal Iraq. So these are all important and interesting opportunities. I think these just become more urgent recently because of the Russia, Ukraine situation. Europe is trying to get off Russian gas addresses. And that gases it’s secure and is put in a very difficult position. So Europe is looking at what wearing to get more gas, a lot of that could be more of that will be liquefied natural gas Imports from around the world such as Qatar and USA. Indeed, it is also its looking immediate neighbourhood. So it is looking like Algeria. Which already sends some gases to Southern Europe? Also, it is looking at Azerbaijan which sends gas through Turkey. Further, it is looking Eastern Mediterranean area, but there are other sources of gas too and I think the Kurdistan region is one and very realistic and a quite large potential source of gas is going to Turkey and then either free up gas supply to Turkey, the gas itself flows through Turkey to Southeastern Europe. But this is quite an economically technically feasible project, not an instant one. It would take a few years. There are political and Technical commercial challenges, but a bit of a promising one for the region which would help diversify its revenues just way from the oil that provides. Also, a gas supply for local economic development and export for earnings as well.

Mahmood Baban: Thank you for your brief, I would like to ask two questions, the first one is about the project of Rosneft to fund the gas pipeline project from the Kurdistan region to Turkey, could you update the status of the project? The second question will be about, your latest study of gas Kurdistan, that KRI will produce 40 BCM of gas per year in 2035, which is 25 BCM for domestic use, and 15 BCM could export, in a time like today uncertainly about the future of the gas market, is that possible Kurdistan region to export gas for EU country?

Robin Mills: Yes, thank you for the questions, So the Rosneft pipeline is assigned as part of the deal a couple of years back. When Rosneft also bought a stake in the oil export Pipeline and also acquired some more oil blocks from Kurdistan. So, the gas pipeline from Rosneft is not advanced. There’s no real work done on that. As we understand it. This option that Rosneft has built a pipeline expires in the middle of the year, so it is very close to expiring.  And we don’t expect the process that you’ll go ahead with that. There’s been no sign of any work on the ground and Rosneft at this moment has others issues to deal with which back to Russia and will have problems with financing and so on. So we don’t see that as an issue now, what is going ahead is, as you say the pipeline is being built to Duhok by Kar Group and now the pipeline will then off to be very close to the Turkish border on the other side of the Border there. Is it already a gas pipeline? That goes pretty much up to the border? So then all we need is a short length of pipeline from the Duhok to the border to enable a connection to the Turkish system. So that is the project, which could go ahead quite soon. And then when there is a surplus of the gas in the Kurdistan region. Then the region could begin exporting to Turkey. So you ask and have to some of the numbers on the exports. Those depend very much on the options of how much gas is developed in some of these fields. As we say is technically to be challenging. It depends on how much we assume is required for domestic use, I believe. But we think quite realistically, they could be 10 to 20 billion cubic meters so per year for export, I think another point that’s important there. Is that the European market, and the Turkish they want gas in the winter? When it’s cold, they want gas for heating. The Iraqi Federal Market wants gas in the summer when it’s hot for power generation for air conditioning. So there’s a very nice potential project there, where you could send gas in summer to Federal Iraq, and send gas in winter to Turkey balance, those two markets. So, we see that both of those markets are quite interesting and viable ones. We think it’s worth investigating both of them.

Mahmood Baban: Thank you. Thank you very much. We’ll get back to you.  Now, I would like to give the stage to Dr Sarah. She is an expert in energy planning and energy strategy. I’d like to hear from you about the opportunities and challenges facing the European Union by avoiding Russian natural gas, economically and politically, and what will be the other problems in the coming years?

Dr Sara Vakhshouri: Thank you so much for having me. I also like to thank Carol and Robin for the very good introduction and background that they gave both on the issue in Europe. And also the potential Kurdistan region in terms of natural gas resources and trajectory of production and Export, something that I like to add to today’s discussion, is that besides Ukraine’s invasion by Russia, which had a huge impact on energy policies and energy strategies of many countries in the world and not only Europe but also major other consumers of energy. But also have the issue of the energy transition, both together or going to amplify the importance of natural gas in the global energy Mix in the years to come, and I think something is very important and Carol also mentioned that, which is the time factor, I always like to distinguish the short-term versus medium or long-term. Why we are looking at everything through the lens of the short-term. Yes, there is. No quick fix or there’s nothing no solution within the next few months immediately have Europe reduce dependency. And all horrifying news comes out of the differences between the prices of natural gas in Europe with other regions, but when we are looking through a lens of long term perspective. We see that as a Carole also mentions Europe is going to reduce its Imports and dependency on Russia. This means that perhaps the demand for alternative sources and alternative gas reserves in Europe is going to increase. But when we are looking at the available sources, we are talking about Qatar LNG or U. S LNG in this pool of Supply, there is limited Supply. And if we are going to have a Russian gas out of the game, it could be out of Europe. But obviously, we cannot have thought of having Russian or a portion of Russian gas out of the market without thinking of having new supplies. So, these reserves in Kurdistan are going to be more important in light of diversifying the supply sources and also increasing the global resiliency and energy security when it comes to natural gas supplies. Just because Russia is a major Supply in the market. But, Europe is also trying to reduce its dependency on Russia. Russia also has been trying to diversify its market, and also reduce its demand security dependency on Europe by diversifying its both infrastructures in terms of expanding its capacity for export its natural gas to the buyer LNG, but also pipelines to like tour Siberia to China, which now they’re looking to expand its capacities. So Russia also has been and is going to look to diversify its market and reduce its security of demand dependence on a European market.

 I also like to emphasize a point that Robin mentioned about it. The role that Kurdistan Supply could play in the region for that different seasonal Supply availability because at the major demand areas markets around just look at this Pipeline and also immediate proximity markets around these reserves are about central  Iraq and electricity has been a national security issue for the country for a long time to have a significant dependency on both electricity and natural gas imports from Iran, which hasn’t been. Again, as was mentioned, not sustainable because of high prices, and political reasons for sanctions on Iran, Iraqi government has negotiated with the US government to get a waiver for its imports from Iran, but also, Iran’s seasonal demand changes during the year. So its domestic consumption is significant also to the prospects of reducing the production capacity in Iran If there is not an adequate investment on time.

So, Kurdistan could play a very important role and if with that flexibility that it could have with the two markets of central Iraq and overall Iraq, and also Turkey that they have different peaks of demand in different seasons. That would be a very interesting and viable opportunity for the region. If I just wanted to briefly conclude, I would say that the energy transition obviously when we’re looking at natural gas is going to have a very important role while we are moving from fossil fuels, more emitting fossil fuels to cleaner sources of energy. So the demand for natural gas is going to increase more than today and Then be Ukrainian invasion and crisis that now is going to have is going to make that demand need for alternative sources of natural gas even more significant. So, obviously at this time, having a source, again, a considerable amount of sources that Robin already gave a wonderful background on that is crucial for global energy security.

Mahmood Baban: thank you, now another panellist of the webinar Mohammed Hussein- economic analyst at Iraqi Economists Network, answers the uncertainty of neighbouring countries, especially Turkey and Iran, in the face of the development of natural gas in the Kurdistan Region?

Mohammed Hussein:  I would apologize for lately joining the discussions as I had a last power blackout problem, which is unfortunately still a usual problem in Iraq. So you start with the first neighbouring country you just mention, which is Iran. Certainly, Iran is one of the political hard that would face any strategic gas project or export infrastructure project in Iraqi Kurdistan and there have been a lot of reporters and talks in the local media about how Iranians would play all their cards and whatever they can do to just looks like this run and gas pipeline project between Sulaymaniyah and Duhok, to hold. And the issue is Iran has a great influence on the Political dynamic decision in both Bagdad and Erbil, like that and attribute. It has huge leverage in Iraqi politics at all levels, especially when it comes to a gas project or a gas infrastructure project that would certainly bring up the Iraqi Kurdistan region and could become a competitor for the Iranian gas in both the Iraqi market and Turkish market as well. There is no doubt. The Iranians would have placed some role against this project. And with the use, of some of the Iranian Affiliated group or some cards that Iranians could have in the political Dynamics in Baghdad in their government formation process in Bagdad. Even in the security problems that were recently created for a KRG in Erbil and around Erbil. And don’t forget just two days ago. There was another security issue near the pumping station of the Kar Group in Duhok. So the issue is the Iranian problem is always being there and it’s going to stay there that it’s not going anywhere, but there are also some solutions to handle the Iranian problem.

You know, if the Iraqi federal government and the KRG leadership will be some, some sort of agreement on financial disputes. There would be certainly a way to handle the Iranian problems or deal with the Iranian issues in Iraq and the Kurdistan region especially. If the oil disputes will be resolved between KRG and Bagdad. And especially in the line with the recent ruling from the Iraqi Federal Supreme Court, I would say the Iranian problem would not be such a huge hard, or would not be a part of that cannot be a solution to it, but about Ankara and Damascus. As you just mentioned, and I think, if I will be kind, Turkish would not have any issue except for supporting the project or doing, whatever it needs to do to Facilitate the project because Ankara would be one of the key beneficiaries of the project and Ankara would have a great start in the project and great interest in the project. To be honest I don’t see any role of Damascus in the Iraqi politics and the Kurdish gas and oil sector in Iraq, as you know Damascus and Bashar Assad. The regime is quite overwhelmed, very it is

What about the Gulf countries? Well, I think a lot of the officials in the KRG and the Iraqi federal government would look to Finance it, from the Gulf countries after they got disappointed by Rosneft and the Russian Finance.  the finance from the Gulf country as well as the finance from the US and the European countries would be something that KRG leaders and leaders of Iraqi deferral also would look for it. I think the Gulf countries will somehow be happy with the project, the project would not have anything to harm the interest of the gulf countries. Now, the Iraqi problem has somehow become a headache for Saudi Arabia, which is the main and leading country in the GCC. I think those countries would be happy to see the Iraqi people resolve their electric power shortage and their energy issues just by brokering a deal when the local gas field. And just by reaching a deal between the Kurdistan region and the Iraqi federal government of Iraq. Therefore. I don’t see any issue from the Gulf countries. So the key issue here is how the KRG leaders and the Iraqi federal leaders can find a way that that’s at least convince the Iranians that this gas pipeline or development of the KRG gas sector, the characteristic of the gas sector would not be something against the Iranian. This time you should just mention it. The demand is increasing almost every day. You are giving all the geopolitical problems in Europe and elsewhere around the world. And certainly, the Kurdistan gas is not something that could say like seriously competing for the Iranian gas even within the KRG back to the agreement with Bagdad.  And even if the KRG supplies gas will be supplied to the federal government of Iraq and the governor in southern and the centre of Iraq. This still is some demand for Iranian electricity and gas, the Iraqi need for Electric Power and gas to use the power plant is still huge and there is no any big major investment in the Iraqi oil sector to capture the associated gases in the oil field. I would say even by 2025 and 2026. There will be still a need for more gas to supply electric power plants in the rest of Iraq. It needs now,  of course, I will say even with all the investment is in the prospective even if everything will go well and the KRGs gas field will become online and they will supply gas to the Iraqi governorate in the centre and south of Iraq.

Also, there is a  sort of electricity import from Iranian because the demand that the government apply in the Iraqi gas market is still huge. Just Robin said even if the Iraqi Market would still need you in the summertime. So the flexibility of the KRG gas market will not reach Iraqi demand. So I would say that the Iranian handle could be addressed just by some sort of a political agreement between KRG and the federal government of Iraq, by putting the Iraqi oil ministry patronage of the gas project or the perspective gas export infrastructure.

Mahmood Baban: please give us a clear picture of the future natural gas outlook and the price of gas in the coming years? What is going to be changed and why? And what’s the capacity for the EU to be away from the Russian gas?

Andreas Schroeder: Yeah. Sure. May I ask if I would like to share my screen but I have to be permitted to do this? Yeah. Nice. If I can do that Is it, at the moment It’s not working. I’m not, it’s deactivated. So I cannot show my screen. Yeah, it’s not possible now. So let me just carry on without showing anything. Or you solve the problem in the middle  For the next time will be sorted out. Okay. Yeah, so my name is Andreas good. I’m ahead of energy analytics quantitative analytics ICIS, which is an energy market and Analysis provider. And so what we are doing is we are analyzing markets. We are quoting prices and we are forecasting prices as well for the natural gas market and the oil market. It’s for coal. Yeah, Power markets as well. We are a global analysis. So we look a lot at Asia but also Europe. Today, I want to speak especially about Europe because that’s very interesting at the moment. Although. Our current coverage is much Beyond Europe as well. So the gas prices that you have been moving quite volatile and then-recent weeks and months. This is not only because of the war, it was already before. So we had a rising suit price. We had a special situation with Russian gas storage in Europe, being operated differently than in previous years. We had relatively low Russian supplies into Europe, but also a tight Global supply and demand picture. A lot of demand from Asia with the economic rebound after covid-19. So all of this plays together and we already had a high gas price before the Russian invasion of Ukraine. But that latently and now accessible and all the developments by far factor three or four to what we’ve seen before. So this is now a very turbulent situation, in which we are in the price of the super volatile.

European players looking for how to get rid of Russian gas. The storage situation has been quite severe in the past month in Europe. So Europe owns around has around, 100 BCM of gas storage capacity. This is quite a decent amount. That’s good. It could provide a lot of stability during the issue. And some countries have no regulatory regime for storage. So they are freely floating. And also some of the storage in Central Europe are owned by Russian players or directly on Pegasus. This is especially the case in Germany and the Netherlands where the largest storage facilities are owned by Gazprom Affiliated companies. That’s a strategic disadvantage for Europe in regards to its independence from Russia. And last year  2021. We have seen how the operation of gas storage is owned by a gas pump. Affiliated companies have been quite different to previous years. So the storage patterns have been super weird and not are governed by market prices so much. But, there is now busy. Is that the matter has been operated on a strategic basis to withhold gas from Europe and to prepare for a shortage of Gas in the winter. That’s at least allegations against a government, which can be underpinned with some data by now. Meanwhile, the winter has been quite mild so far there. Storage is back to a normal range in Europe. Also, prices resending a bit, coming back to a more like a hundred euros per megawatt-hour range, which is still high by historic standards, but it’s not high when you compare it to a few weeks ago, and when you compare it to what we see the December. Demand has been relatively weak due to the mild weather. So we are we had a cold spell in Europe in the past week, but overall, the winter has not been severe. So this has helped to avoid a gas shortage over the winter. The mild winter has saved Europe from an even worse situation facing a wide neighbourhood of Ukraine, but also a hard winter. That would be double.

It would be quite hard for Europe. But luckily for Europe temperatures are low and the gas demand is mostly used in heating as those are used a lot on Residential Heating. Therefore the temperature is a very important determinant of gas use in the EU. The interesting thing is the Russian supplies have been relatively weak in the year 2021, but they have come back slightly since January. So January was the month where Russian supplies into Europe were super. But since the day of the invasion on the 24th of February, Russian flows have picked up again, and they are now coming back to a more normal estranged that we’ve seen in the past year as well as the preview. So it is interesting to observe. The Russian invasion has led to slows becoming stable again. Let’s say the more stable and increasing Russian imports gas to Europe at this is Yeah, contradicting some of the statements of Europeans that they want to get independent of Russian gas because as we see in the most recent data on the daily basis, Russian flows are not going down since January, but they going up. Therefore also the money spent on Russian gas by Europe is going up as well.

Also, if we expand the picture bit wider. And so the to look at the global price picture, LNG price, globally moves in correlation. The Asian prices heavily correlated with the European price. And we see it now, especially with all the volatility in the European prices. Expose the Asian prices following Europe Line by line. It’s almost like two lines Moving in parallel with few deviations. Only, this shows that we have a globalized energy market now. And I think it was Carole at the beginning of this event. She mentioned the regional prices of gas indeed. That’s correct, and we are moving to a world where the price is globalized. And, the current price shows spectacular for Iraq. This is a chance because if you become an exporter. And prices will more and more be driven by the most expensive country, which is now Europe, but it can be Asia as well. This means global market prices are always a very high Market presence of the produced region like Kurdistan, and it is thinking about producing gas. The Matrix may increase with a more globalized gas market.

Mahmood Baban: D. Carol, my question will be,  what do you expect in the next few months and especially next winter for the gas market?

Dr Carole Nakhle: first of all, I mean it’s difficult to distinguish between just what was going to happen in the market Dynamic. If I were analyzing it in the coming perspective and what can happen on the political front and the geopolitical front, this is the big card. of course, was not sure they are as always is unknown because the demand is seasonal. So, we do have, for example, we heard higher demand even at least in Europe during the winter and it is off during the springtime and the summer starts to replenish stocks, but it’s more or less than depends on an unknown aspect of the weather. So but we can still moderate it. Because you understand, what we don’t know is how a much worse situation can get in Europe on the political front.  The war is still raging. They continuously failed peace talks and we can see how Europe has been unfolding. Its sanctions on Russia gradually appeared one layer after the other and so far, oil and gas exports have been protected. But what we are going to reach a point where the war becomes so nasty, that Europe has no other choice, but to choose the nuclear option and it imposes sanctioned on Russian gas or the fresher does, was exactly at that retaliation. Also, press the clear button and then they cut their gas supply. So that’s why I have this big unknown. That is very difficult to model or predict. What’s going to happen with gas markets in Europe? But if leave the geopolitical aspect on the side if we looked at current market dynamics where the prices are, we already see how producers are responding to our exporters from outside. The region is responding to these higher prices, which already started before the war started. And at the same, we also see some impact on demand. It was these Dynamics in happening taking place. You would expect to see pressure ease off, but I say that big hesitation. Assuming the situation does not stay, but of course, the situation in Ukraine escalates and we should expect the worse for the gas market in Europe. At least for the next few months of talking not longer than that.

Mahmood Baban: I would like to ask about your latest study about KRI capacity for natural gas previously that it mentioned. Although Kurdistan gas exports to Istanbul are 23% cheaper than U.S. LNG, Kurdistan gas to East Turkey will be 49% cheaper than Iran, and KRI costs to Bagdad 40% cheaper than Iran. Now I would like to ask How Kurdistan Gas can be cheaper for the EU? What is the cost difference, if KRI Supply gas to the EU?

Robin Mills: Yes. Thanks for that. So, the Kurdistan region has the advantage is supplying gas by pipeline whether to Bagdad or Turkey because the distance is relatively small and it is very close to Bagdad, but it’s also quite close to Turkey and the other supplies, obviously the US that’s liquefied natural gas has to be shipped across the Atlantic Oceans long-distance. The Iranian gas into Turkey has to come from the Gulf area so along the way go to north Turkey and so much longer pipelines. And so we believe that the gas from the Kurdistan region could certainly be cheaper and therefore be competitive in both of those markets. To get to Europe, I think you get to least in Europe and be competitive is a bit harder, but the situation, of course, has changed a lot since last year with the Russian issue. Now, because Europe is so key to stop using Russian gas, and at least reduce the use of Russian gas. It will look at other sources that even if they’re not necessarily as cheaper as Russian gas. So that also gives gas from the Kurdistan region the chance to be economically competitive in Southeastern Europe. So that is that’s the advantage of this. And the gas from the Kurdistan region has it in all of those markets. The only question there is okay. How would Iran? Or Russia responds to that competition. Would they cut their prices if necessary, you know possibly they would so and then it just comes down to how much they’re willing to cut their prices. But at the moment for Iranian gas into Iraq and to Baghdad, there’s no competition that the only gas supply. Apart from that, of course, they could charge a high price, if there’s competition and the price has to come down.

Mahmood Baban Thank you. I’d like to ask Dr Sara, how the EU secures natural gas, or in a way, my question will be more clear because we are reaching out of time. How EU can secure the gas demand?

Dr Sara Vakhshouri: Thank you for the question. Well, it’s very hard to answer this. It’s in what you’re looking for security. One issue that always is important, especially for a politician. Is affordability, affordable price, So Russia has always been a major supplier to Europe is because simply the prices of Due to different reasons including the proximity has been way more affordable than for instance U.S. LNG prices. So it’s something that we have to wait and see is that obviously, most of the countries, especially the countries newly you are looking into it imports from Russia and also diversify their supply sources. But you’re looking at it from a global perspective. we have a global demand Global Supply. So if we redirect certain supplies to Europe. There is a gap in another part of the world, which means that Russian gas, which loads there unless we have a new additional capacity, more than what we are already expecting to meet the future demands. That’s why for instance reserves like Kurdistan are very important and interesting for Global Security of natural gas security supply to diversify and have an alternative source to Russian Sources. The other issue is that as Andreas mentioned, one of the good samples, the ownership of storage facilities that are very much dominated by Russia, as if you are moving forward, and everybody realizes that. IS the tangle Russia’s influence in the energy market because of its network of influence? For instance, the United State the Biden administration and the U.S. government announced that they are going to stop the import of oil, petroleum products or any other sources of energy from Russia. Something that hasn’t been included in the nuclear aspects. Still, we have and that trade and import from Russia and going on, but we’re not even though that U.S. could put a sanction and ban on imports of others sources of energy, and when we’re looking at for instance diversifying from natural gas by looking at the mirror around the world, also in terms of energy transition that again, natural gas, but also nuclear is going to have a big chunk of energy in power generation. Russia has a very strong influence around the world in terms of reserves and processing and the feed for the nuclear power plant. And to many countries like the even United States, we didn’t ban nuclear plant imports for the feed of stocks of power generation in the United States. So I would say affordability is very important. How going back to your question? Europe could supply, its natural gas and more suppliers in the market would be easier, but if the EU starts importing more LNG and natural gas from other suppliers, this means that there is a gap as somewhere else because those supplies are redirected to Europe. So we’re still going to have that rusher and export, someone else could put paying for that. It’s very important to look into new reserves. So I think that’s, why this is a very good chance and opportunity for Kurdistan.

Mahmood Baban: Thank you very much, Mr Mohammed. In short, what do you think will be the consequences of the Iraqi Federal Supreme Court’s decision on oil and gas in the Kurdistan Region?

Mohammed Hussein: I would say the court is rolling would affect the KRG oil and gas sector. If it will not be handled with a wise political approach. Also, I do believe that the optimistic politicians and leaders believe that this is an opportunity to set a limit to the long-standing political and oil dispute between the KRG and the Federal government of Iraq.

So certainly that the court is ruling like it shock the KRG oil and gas sector and it is going to terrify a lot of the Investments that would rather come to provide capital and finance to the KRG  of the oil and gas sector. If it will not be handled.  Let’s say in a way that could be beneficial for both the KRG and the Iraqi federal government. It’s time to design a win-win solution for both Baghdad and Erbil and it’s time to I think find a strategy that could ease the tension and deal with the federal Supreme Court is rolling in a way that can keep the investors and IOC working in Kurdistan Region, and help to develop the gas sector, which is very much needed in both Kurdistan region and Federal government of Iraq.

Mahmood Baban: finally, please give us, your view about the price of natural gas in the coming month and next winter?

Andreas Schroeder: Yeah, thanks for this question. So we’ve seen on the forward curves. The prices are moving up along the curve, the whole forward curve. So even the winters, the coming years are coming up now and this is interesting to watch because so far, the current past month. The situation has been a very momentary reaction. Also, prices are up on the front, but not so much in the data is this is now shifted. So we’re coming more into a world where now Market players believe this is a word to say the New Orleans, which we are in, So, want to stay the new orders are the same, which we are in higher gas, prices world. So, from forward, cost prices are moving of this world. It’s good for exporter countries because they can make more money. It starts with the gas consumers in Europe.


April - 2022
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