Source: RISS

Another acute angle of bilateral economic relations in the foreseeable term will still be Russian exports to Turkey. The fact is that only large domestic companies are capable of getting established in the Turkish market, particularly in the energy sphere, whilst small and medium-sized businesses often miss out.

The main problem lies in the fact that the Russian state lobbies only for the interests of the “heavyweight”, in anticipation of massive revenues from their activity. To ensure substantially enhanced trade figures, the Russian side needs to develop a long-term export strategy oriented at the Turkish market. Ankara has this type of strategy, which is its significant advantage as, with the help of this state programme, it is possible to increase returns from mutual trade many-fold.

As long as Russia bets only on large-scale projects with the Turkish side and waits for the return of its large investments, forgetting about the small and medium-sized (for example, contractors or subcontractors) firms which could prove their worth in the Turkish market, there will be no fully-fledged result of the mutual ties. This is because bilateral or multilateral commodity transactions may well be left unrealised since they directly depend on the political situation which can change rapidly. In turn, small and medium-sized entrepreneurship is not so much dependent on the foreign policy situation since it has primarily private capital, but it would certainly welcome some support from the state.

The declared strategic partnership between the two countries will actually get even stronger if the parties take into account the existing problems and try to offset them.

It seems that, in spite of the signed programme for joint cooperation up to the year 2015, the actual Russian participation in the Turkish market is unlikely to be expanded at the expense of supplies of alternatives to hydrocarbons. This, obviously, does not have the best impact on the variety and diversification of foreign economic proposals.

In turn, the Turkish side will try to squeeze the maximum out of this document in order to create a good basis for the successful implementation of its long-term export strategy in the Russian vector, which is a priority for Ankara. Turkey will, most likely, continue to pursue a balanced foreign policy which will be closely intertwined with its pragmatic economic interests. It is necessary for the Russian side to take this into account, particularly in matters of vital importance for its own development.

It would not be excessive to monitor closely how the tone of various statements changes, as well as Turkey’s behaviour on the international and regional track in order to try to predict its possible steps regarding Russia.

The economic cooperation between the two states can be described, in general, as effective and mutually beneficial and, in some cases, strategically important as well. It is about energy relations, which are the backbone of the bilateral partnership.

New areas of economic cooperation have quite clearly emerged – they have not yet received practical implementation though – not only in regard to mutual trade, but also in the investment field. This was in many ways facilitated by Turkey’s long-term state programme for the serious enhancement of exports, which assigns a major role to the Russian market.

It should be expected that there will be a dramatic increase in Russian investments in the Turkish economy after the implementation of major investment projects in the Turkish territory begins. Moscow will, most likely, continue to be for Ankara both the energy vis-à-vis and a trading partner, but, in political and economic upheavals, the balance of these roles may change in one direction or the other.

Eldar Kasayev, an expert on energy investments in the Middle East and North Africa, exclusively for the online magazine “New Eastern Outlook”.

The economic partnership of Russia and Turkey is rapidly gaining momentum. However, there are still obstacles along the way. One of the long-term goals of Moscow and Ankara is a significant increase in trade turnover and foreign direct investments in each other’s economy. The parties intend to achieve this through the implementation of various government strategies and programmes designed for a medium- and long-term period.

The protocol of the 12th meeting of the Mixed Russian–Turkish Intergovernmental Commission for Trade and Economic Cooperation stated that the creation of favourable conditions for mutual trade in order to achieve a 100-billion trade turnover (according to the Turkish statistics, in 2012, trade turnover was more than 33 billion dollars) has become the main area of interaction between the two countries. The parties signed a bilateral programme for trade and economic cooperation for the years 2012–2015.

The document is indicative in nature and a kind of industry “road map” defining the joint strategy for partnership in such areas as energy, industry, agriculture, tourism, regional cooperation, transport, financial and banking cooperation. The programme is designed to further facilitate the creation of favourable conditions for the realisation of the business potential of Moscow and Ankara.

In spite of the adoption of this document and the agreements reached following the meeting of the intergovernmental commission, the three-fold increase in the current volume of annual trade turnover planned by the authorities of the two countries is unlikely to be achieved within 3 years’ time. This will require at least another 5–7 years.

The extent of Russia’s interest in the Turkish market is limited to large-scale projects, the dividends from which can be obtained in the long term. But a situation may arise in which Moscow will not receive the expected returns at all. This is because Ankara is quite capable of switching from one project to another guided by its own geopolitical and economic interests.

Suffice it to recall the story of the Nabucco gas pipeline, which was nothing else but the vis-à-vis of South Stream. It was in Russia’s interests to develop the latter pipeline, whilst the former one was important for Europe and the US, which have been trying for a long time to weaken the power of the Russian “energy muscles”. Initially, Turkey, which supported the West, was actively lobbying for the promotion of Nabucco, and that caused serious concern in Moscow. However, later on, on realising the extremely low profitability of this project, which used to be one of the most popular projects of recent years, Turkey sided with Russia and joined the other project. An agreement was signed in Moscow allowing the laying of South Stream through Turkey’s exclusive economic zone in the Black Sea.

In response to that, Russia reduced prices for the natural gas which Turkey buys as part of take-or-pay contracts. In 2013, Ankara will purchase an additional 3 billion cubic metres of unclaimed raw gas from the already existing gas pipeline. The parties expressed willingness to develop cooperation on the export of gas and to discuss issues on increasing gas supplies from Russia to Turkey through Blue Stream or the Trans-Balkan pipeline.

Under the contract with Russia, the Turkish side undertakes either to purchase the specified amount of “blue fuel” by a certain date or to pay the cost of this gas, even if it does not need it by this date. Initially, the Turks were happy with these terms, but, with the expansion of other sources of gas supply as well as with the decrease in its demand within the country, this kind of transactions became unprofitable for Ankara.

Thus, by concluding the above-mentioned agreement on the South Stream gas pipeline, Turkey, first of all, has cared about its own interests. On the one hand, it has improved its prospects of becoming an important transit hub for Europe and Asia, and, on the other hand, it has been able to ensure more favourable terms for paying its arrears on natural gas.

It is getting clear that the development of bilateral relations in the energy sphere will be built based on the strategic plans of the states during a specific period of time. Here, you cannot really count on the agreements that have been reached earlier because, as has been shown in practice, they may well be adjusted in accordance with the agenda. The situation around South Stream and Nabucco is graphic evidence of that.

Eldar Kasayev, an expert on energy investments in the Middle East and North Africa, exclusively for the  online magazine “New Eastern Outlook”.

Long before the US intervention in Iraq it was clear that  the major point of American interest towards this country were its natural resources since Washington has always been striving to gain control over the better part of oil and gas rich countries in the region. According to OPEC the territory of Iraq contained over 112 billion barrels (bbl) of proven reserves back 2003 coming second it the world’s ranking after Saudi Arabia with 261 billion bbl of proven reserves.

Today Iraq retains its position in the world ranking. According to Iraqi experts next year’s foreign investments in the development of the oil infrastructure will hit 30 billion dollars. Baghdad needs those since the oil exports money are the driving force of the country’s economy.

Foreign investment in the development of the fuel and energy complex is necessary for Baghdad since the export of hydrocarbons is the driving force for the economic modernisation of the country.

In terms of the oil production volume, Iraq currently takes second position after Saudi Arabia amongst members of the Organisation of the Petroleum Exporting Countries (OPEC). According to Iraqi experts, the future annual investment in the state’s oil infrastructure is forecast to be 30 billion dollars.

There could be quite a constructive discussion with representatives of the Kurdish business elite regarding the future use of not only oil, but also gas resources, which are abundant in the region as well.

So far, Iraqi Kurdistan has been supplying only oil, but now there are large-scale preparations for the extraction and export of gas. At the moment, Kurdistan’s gas reserves are estimated at 2.83 trillion cubic metres of gas, which constitutes approximately 90% of all gas reserves in Iraq.

It is noteworthy that the world’s production of this raw material has been recently growing quite rapidly, with the average annual increase of 3–4%. It seems that this trend will continue in the future. The most substantial contribution to the global natural gas market should be expected, due to its growing extraction and export, from the Near and Middle East, including Iraqi Kurdistan, for three main reasons.

Firstly, because of the sizeable fuel reserves. Secondly, because of the close location to the main buying markets. Thirdly, due to the quite low cost.

The Austrian energy company of OMV and Hungary’s MOL have already signed agreements on the purchase of 20% of shares (10% each) of Pearl Petroleum Company, which owns two projects for the development of the Kurdish deposits of Khor Mor and Chemchemal. By 2015, these deposits are projected to be generating up to 85 million cubic metres of gas per day. It is obvious that a certain part of this gas will be used to meet the energy needs of Kurdistan itself, whilst the rest of it will be exported.

Iraq, in general, and Kurdistan, in particular, are in need of the development of the gas industry as an independent part of the fuel and energy complex. In this connection, the establishment of seamless supplies of this raw material to European countries would serve for the Kurdish side as an excellent basis for achieving this goal. Moreover, the favourably located natural gas reserves can well become a valuable asset for European countries in their strategy aimed at the diversification of the sources of energy supplies.

It is obvious that the emergence of such a competitor is contrary to the interests of Russia’s Gazprom, which supplies three quarters of its exports to the European market. However, the Russian company’s path to achieving its ambitious plans may get more complicated by the construction of a pipeline to Europe through the territory of Iran, Iraq and Syria.

Firstly, this is being done to put pressure on Turkey in order to force it into signing a transit agreement and rejecting its policy of reselling Iranian gas.

Secondly, this type of route will help to curb the enthusiasm of the Turks, who are trying really hard to turn Ankara into some kind of regulator of gas supplies to Europe, not to mention their political ambitions to become the region’s leader. Being a member of the UN Security Council, Turkey is represented in almost all European organisations, except for the EU, the negotiations on the entry to which it continues to maintain.

The above-mentioned project is quite promising since European countries are showing genuine interest in the north of Iraq, which is rich in hydrocarbons. A vivid evidence of that has been the strategic agreement on energy partnership signed by the EU and Iraq. Under this document, the parties intend to strengthen cooperation in a number of areas, including energy security, the development of natural gas fields and the development of renewable energy sources.

Some time ago, the then EU Commissioner for Energy Andris Piebalgs described Iraq as a key link in energy supplies to the EU and pointed out that this country is soon to become an important supplier of natural gas and to serve as an energy bridge connecting the Middle East, the Mediterranean Sea and Europe. Besides, the export of “blue fuel” from Iraq will help, to some extent, reduce the dependence of the EU on Russia.

Nevertheless, the possible gas transit through the three Middle Eastern states to Europe is not as worrying for Russia as it might seem at a glance. Russian experts are convinced that this gas pipeline is unlikely to be built in the medium term because gas production is still an underdeveloped industry in Syria and Iraq. Moreover, the political situation in these states is highly unstable.

Eldar Kasayev, an expert on energy investments in the Middle East and North Africa, exclusively for the online magazine “New Eastern Outlook”.

Earlier this summer, a long-term energy strategy was announced in Iraq. The developers of this document forecast that, by the year 2030, the country will have managed to sell 6 trillion dollars’ worth of oil and gas in external markets, thus taking second position in the world suppliers ranking, overtaking Russia.

The plans of Baghdad provide for an increase in oil production to 4.5 million barrels per day by the year 2014, and, by the end of the decade, crude oil production is expected to be approximately 9 million barrels per day. In the long term, Baghdad is planning to reach the level of 12 million barrels per day. For comparison: the current major producers of “black gold” – Russia and Saudi Arabia – produce approximately 10.5 million and 9.5 million barrels per day respectively.

Over the next 20 years, investments in the Iraqi oil and gas industry are expected to be at the level of 620 billion dollars.

At the end of last year, the International Energy Agency (IEA) published the World Energy Outlook, which outlined the trends for the development of the hydrocarbon sector of the Iraqi economy in the future.

In particular, according to this document, Iraq makes the largest contribution to the growth of the world’s oil production, and the state’s ambitions to increase significantly the existing volume of crude oil production after the protracted conflicts and instability are not constrained either by the size of energy reserves or the cost of their development.

However, coordinated and balanced actions will be required of the Iraqi leadership to improve the entire chain of supplying energy abroad, precise clarity as to how Iraq is planning to extract long-term dividends from its hydrocarbon wealth, as well as the attainment of internal consensus between the country’s various ethnic and religious groups on the oil policy.

According to the IEA projections, in 2020 oil production in Iraq will exceed 6 million barrels per day, and, in 2035, this figure will increase to 8 million barrels per day. The country is gradually turning into a key supplier to the fast growing Asian markets, mainly to China, and, by the 2030s, it is capable of taking second position in the world oil suppliers ranking, overtaking Russia.

China is already the world leader in the volumes of oil imports (50% of “black gold” comes from the Middle East) and continues to invest significant funds in foreign oil and gas fields.

Without growing supplies from Iraq, the oil markets will experience difficult times characterised by high prices for hydrocarbons. Iraq can get almost 5 trillion dollars from oil exports over the period up to 2035, that is, an average of 200 billion dollars a year, and thus it can have an opportunity to change the country’s future.

The collection and processing of associated gas, most of which is currently burned in flare stacks, and the development of gas fields give hope for a more effective electric power industry through the use of natural gas as fuel. After the domestic needs are met, the export of Iraqi natural gas to external markets will be quite possible.

Eldar Kasayev, an expert on energy investments in the Middle East and North Africa, exclusively for the online magazine “New Eastern Outlook”.

Indeed the question of the introduction of new tax breaks for foreign companies can be resolved positively with the participation of the Libyan oil ministry.

In addition to modernizing conditions for investors, the question of possible changes in the structure and function of the “National Petroleum Corporation” of Libya is also on the agenda. For example, the Libyan side recently suggested that the government might find it acceptable to transform the fully state-owned company into a commercial holding.

It seems that this scenario was intentionally voiced in order to attract international players to invest in the development of the Libyan economy. It is hard to imagine that the Libyans will voluntarily give away an inexhaustible source of regular income to the private sector, which for many years had a monopoly on oil production.

Yet despite the possibility of making attractive conditions for potential investors, fierce tribal conflict in Libya is capable of upsetting the hydrocarbon industry. There are well-founded doubts that the central government will be able to control all the major oil fields of the country.

 A specific example of this is the main deposit of “black gold” located in Cyrenaica. The elders of the local tribes and warlords declared themselves autonomous and that they would independently manage energy resources in their territory. Radicals also try to intervene in “oil redistribution”, as their positions are strongest in this part of Libya.

There is not even agreement with local state companies. For example, a company based in Benghazi Agoco, producing about 25 % of the government’s oil, is opposed to exporting oil via the “National Oil Corporation” as it did before the war. According to one of the company’s staff members, Agoco held consultations with some consumers of fuel about direct sales.

Chances for Russia

We should not forget that the Libyan reserves were once controlled by Russian companies, who are making efforts to regain the market and surpass competitors.

At the end of last year, “Gazprom Oil” sent Eni a notice of intent to exercise the option to acquire a stake in the project “Elephant”. Now they need to get official approval from Tripoli for the Russian country to enter the project. It will not be easy. The fact that the Libyan government is unlikely to be completely ready to forget the “double game” played by the Kremlin, which some time ago tried to enlist the support of both Muammar Gaddafi and his opponents. It is no accident, despite the work undertaken by the Energy Ministry for developing connections in oil and gas with Libya, the country’s leadership stated that it has a number of outstanding issues with Moscow (including checking for corruption).

In addition to “Gazprom Oil”, “Tatneft” and “Gazprom Libya BV” also wish to return its assets to the Libyan oil field. Before the military coup “Tatneft” led the development of four blocks (in the Ghadames and Sirte basins) with a total area of ​​18 thousand square kilometers. At the time of the agreement it was assumed that the company would carry out project activities until 2035. “Gazprom Oil” received a license for the development of two potential sites (one on the shelf of the Mediterranean Sea, and the other on land, south of Tripoli), but was forced to suspend work due to the sharp deterioration of the situation in Libya.

Restoring the position Russian oil companies had previously will be problematic for two main reasons. First, the lack of special privileges, which is now enjoyed by many European companies, drastically lowering the chances of success. Second, even in the new bidding war that, according to Libya’s leadership, could be held within a year, the need will arise to find a common language with the local authorities as well as with the leading Western powers. For the latter, the dialogue with the Libyan side is likely to be more effective because of its high degree of confidence in the West, who supported the current rulers of the North African country.

Therefore the appearance of Russian firms is more realistic, for example, within the framework of a foreign consortia. Moreover, we should not exclude the possibility that, after returning, domestic companies will be missing previously existing assets.

If existing Russian contracts are assigned to the category of the “old regime” and acquire the right to conduct operations on them again, it will require an international bidding procedure, whose results are unlikely to mark a victory for Russian business.

Eldar Kasaev, expert on energy investments in the Middle East and North Africa, especially for the online magazine “New Eastern Outlook”.

Libyan oil has always been at the center of not only national interests, but also the interests of international oil companies and the various states attempting to take advantage of the political struggle and even revolutionary mood of the country. Though after the revolution Libya has witnessed tough economic times, it has nevertheless attracted large foreign companies, aimed at increasing oil production. Who among the international players is playing the role of first fiddle in the Libyan oil sector? What are the chances of Russian business returning to the market of the North African state and helping the Libyans achieve their goals?

The amount of oil produced in Libya, which leads the rest of Africa in the production of crude, does not exceed 1.4 million barrels per day. The Libyan leadership has requested an increase in the daily rate up to 1.7 million barrels per day by the end of this year. Yet this will be difficult to reach, even with the return of international companies in the region, represented by Eni, Wintershall, Total, OMV, and Occidental. Why is this?

First, there are still deadly clashes in the eastern part of the country, where the main oil fields are located, reducing the production levels of “black gold”. Hostility among the tribes from time to time makes it difficult to effectively manage the oil industry. For example, last year, several large oil storage tanks were damaged. As a result, exporters were missing out on 60-70 thousand barrels per day two months after the incident. Due to the attacks on oil facilities by protesters last January, production of crude amounted to only 1.34 million barrels per day, or 60 million barrels below the December figure.

Second, to get back to normal levels of oil production and large-scale exports of crude, Libya needs financial resources in order to restore production infrastructure, which was severely damaged during the war. Getting the right amount of funds from European investors is difficult because of the crisis, which is sharply felt by the economy of the Old World. As for the US, they too don’t have the funds available for risky foreign investments. The lion’s share of its investment goes to the development of its hydrocarbon industry, especially oil and gas production from shale.

Third, the county is not attractive to investors due to increased potential political, economic and legal risks. This is not the best way to bring about the return of international corporations, whose technological assistance is needed by the Libyan government to achieve its announced goals. Moreover, the Libyans don’t plan on compensating foreign oil companies for oilfield losses associated with damage to the equipment or property. And while many companies have already begun oil production at their own risk, reaching 70-80% of the previous figure, this is not sufficient.

Fourth, the return to normal production levels will be different at different sites. For example, in Sirte, the main gas basin, accounting for about two-thirds of production, is very complex and work there will require a longer period of time. In connection with this, it is important to remember that, based on the statements of the Libyan leadership, the government planned to return to prewar production levels by the end of 2011, and then by the middle of last year. As you can see, meeting the timeline was impossible. In trying to get out of this complicated situation, Tripoli has been forced to invite international players to increase production and the shipment of oil for export.

 The main players

Last year, Libya supplied 379,500,000 barrels of oil to foreign markets. The main consumers have become Italy – 139.8 million barrels (36.8 % of total exports), China – 48.2 million barrels (12%) and France – 46.8 million barrels (11%). The main buyers of crude were Italian companies Eni and Saras, Swiss Glencore, Spanish Repsol, as well as Chinese Unipec.

The level of interest of American ConnocoPhillips, and Hess and Marathon, in working in Libya, is not very high. The supply of this North African country even before the outbreak of hostilities was fewer than 1% of total U.S. oil imports. While the European market is compensated for 10 % of its needs from Jamahiriya, exporting more than two thirds of its territory’s extracted fuel.

Yet American business does not exclude the possibility of cooperation with European corporations in order to increase production in the Libyan oil fields.

It is worth noting that the Libyan government, despite its need for foreign investment and advanced technologies for the recovery of its oil industry, does not intend to be a puppet of the West. Proof of this can be found in checking for corruption in the transactions executed by the former Libyan regime with large oil corporations.

A few assumptions can be made based on such checks. In particular, such checks may become a serious hurdle for foreign companies hoping to expand their business in Libya. This country accounts for about 14 % of the total production of Eni, and in the next 10 years, the company plans to double that amount by investing 30-35 billion dollars in the Libyan economy.

In addition, the checking of the European giants could play right into the hands of the United States, increasing the competitiveness of US oil producers, which could shift to Libya if difficulties arise in other markets.

Generally speaking, the work the Libyans are doing to attract foreign companies is being done successfully. In the autumn of 2012, a major industry event called “Oil, Gas and Sustainable Development” was held in Tripoli. Policy makers and representatives of business organizations were among the participants of the event. In his speech, Abdurrahim Bin Yazza, Libya’s former oil minister, said that the return of high levels of production in such a short period of time was made possible due to unexpected efforts. Yet the country is not going to stop there, but instead seek to increase the available indicators to 2 million barrels per day by 2015.

A report by Berruyena Nuri, director of the “National Petroleum Corporation” of Libya, pointed out that the country has huge reserves of hydrocarbons and will remain an exporter of oil for decades. In addition, he said that the government is planning to cooperate with international companies at the same high level of transparency as it is today.

However, the declaration of transparency was not taken positively by external partners. The Libyan side named oil buyers in 2012 and published official statistics on the volume and cost of supply, but later decided not to advertise the related data for the current year. In fairness, it should be noted that such secrecy is characteristic of countries that are in dire economic straits and trying to get out of it. For example, Iraq, long after the fall of Saddam Hussein, has not provided official statistics on its oil. Iran, in the midst of numerous sanctions, decided no longer to allow open access to data about operations of its “black gold.”

Eldar Kasaev, expert on energy investments in the Middle East and North Africa, especially for the online magazine “New Eastern Outlook.”

Source: Twitter.com

The main players among foreign concerns taking control of Iraqi mineral resources are Asian companies. Given their enormous human resources and the growing economies of these countries, there is nothing surprising in the fact that they are taking on a lot of Iraqi projects. Russian and other European participants of previous tenders also managed to regain their place in the sun and start implementing major projects in Iraq.

Today, the “Asian invasion”, which has landed on the Iraqi oil fields, includes the Chinese CNPC, South Korean “Kogas”, Malaysian “Petronas”, Japan’s “Japex”, and “Pakistan Petroleum” and “Kuwait Energy Company”.

The Western heavy artillery in Iraq is as follows: the Dutch-British “Royal Dutch Shell”, “Total” of France and the United States’ “ExxonMobil”.

It is often argued that Russian companies are hesitant to enter the markets of those Arab countries that are experiencing a period of reformation after a change of the former regime. In fact, the situation is not so.

I am one of a few professionals who thoroughly hoped to the very end that “Lukoil Overseas” would be successful in receiving back the West Qurna-2 project, which the company acquired in 1997. In 2002, the agreement was canceled unilaterally by the Iraqis. This was followed by attempts from the Russian side to resolve the problem, but to no avail. In 2008, Moscow even wrote off 12-billion in Iraq national debt, but Baghdad made no concessions.

At that time, only pessimistic forecasts were published in the media and in the pages of reputable industry publications. In particular, there were allegations that Russians’ return to Iraq is impossible and that they themselves do not want to return to the Iraqi market. Analysts advised “Lukoil Overseas” not to make the same mistake twice. Moreover, in their view, the United States overthrew Saddam, fully occupied the country, and there was no way of getting in there.

Speaking of Iraqi oil policy, it is not worth focusing on the United States’ position, but on the relationship between Baghdad and Erbil. A regional law was adopted in Iraqi Kurdistan that allows investors to work with less risk on Kurdish territory. The Kurdistan Regional Government continues to sign contracts with foreign companies, bypassing the federal government.

The only U.S. company that won bidding in Iraqi, “ExxonMobil”, is apparently to sell its stake in West Qurna-1 due to pressure from the Iraqi Oil Ministry as a result of the active cooperation of the American concern with Erbil.

Iraq, for the large part, now operates independently. Baghdad holds auctions, concludes contracts, money goes to the Treasury, and the White House does not seem to interfere. Perhaps the United States is offering a chance to those who Saddam Hussein infringed upon to feel independent? However, in the future, Washington will be able to quickly tighten the screws, reminding Iraqis of its authority.

The Americans are actively helping Baghdad to minimize military-political risks. After all, U.S. military units remain in Iraq. They are trying to somehow restrain the internal struggles of clans from different ethnic and religious groups. Today no one can disrupt large enterprises or infrastructures for energy exports. The United States is now focused on the stabilization of Iraq, and if they finally leave, the bloodshed and attacks could increase several fold.

To date, three Russian players are carrying out their activities in the oil fields of the Arab state. “Lukoil Overseas” (a subsidiary of “Lukoil”), “Gazprom Neft” (a subsidiary of “Gazprom”) and “Bashneft” are engaged in the development of Iraq’s fields.

In addition, Rosneft is also planning for the first time to enter the market, and “Zarubezhneft” is eager to return to Iraq after 10 years.

The position of “Lukoil” in Iraq is becoming more stable. The signing of the 2013 supplementary agreement to the contract on West Qurna-2 between the company president Vagit Alekperov and the authorized representatives of the Iraqi state-owned “North Oil Company” and “South Oil Company” registered the transfer to the Russian side of an 18.75 percent interest in the project from the Norwegian company “Statoil”, which withdrew from it.

“Gazprom Neft” is so far the only Russian company to have, along with a maintenance contract for “Badr”, three production sharing agreements for sites that are situated on Kurdish territory. Exploration work continues on two of these sites, at the completion of which, no later than 2015, oil production is expected to start.

“Bashneft” is the exploration and development operator of Iraqi Block 12, which has potential oil deposits. It is noteworthy that in this instance, Iraq has moved away from the traditional scheme in which a 25 percent stake in a joint project must belong to an Iraqi state company, and provided “Bashneft” with the opportunity to own a 100 percent stake and form a consortium among a number of foreign corporations.

In conclusion, what follows is that without the latest foreign technology, Iraq can not deploy its own oil industry production. This requires experience, know-how and top-class foreign experts, including those from Russia.

Eldar Kasayev, an expert on energy investments in the Middle East and North Africa, exclusively for the online magazine “New Eastern Outlook”.

Recently, amid reports concerning the supposed significant expansion of Qatar’s liquefied natural gas (LNG) on world markets, a variety of predictions about the consequences of this expansion for the Russian company Gazprom have been made by international experts. However, what is really taking place here in actual fact?

The traditional consumers of Qatari LNG are Asian countries, which are constantly increasing their volume of purchases. This is understandable both geographically and strategically. Firstly, the emirate can very quickly deliver LNG to Asia, and secondly, the need for energy in many countries of the region is very high. However, recent growth has clearly been observed in Qatar’s exports to Europe, including the United Kingdom (the leader among all importers of LNG from Qatar), Italy, France, Belgium and Spain.

According to statistics, more than a quarter of the liquefied natural gas consumed by the European Union is delivered from Qatar. The construction of an LNG terminal in Poland has begun. By 2014 (possibly earlier), the company Qatargas will annually deliver 1 million tons of gas to the terminal, with the prospect of further increases in exports in 2017-2018. Negotiations on the supply of Qatari LNG to the Baltic States, Belarus and Ukraine are under way.

It would appear that the growth of Qatar’s fuel supplies to these markets could create difficulties for Gazprom, as Europe is a major consumer of Russian gas. However, according to former Russian energy minister Sergei Shmatko, the emirate will not significantly increase exports to this sector in the medium term. Nonetheless, the minister stressed the absence of any obligations of the parties in this regard.

In turn, Qatar insists that its export policy is based on long-term contracts and on linking gas prices to oil prices. Based on its own economic interests, the monarchy can vary the supply destinations and the cost, depending on the current demand from a particular market.

It should be noted that the present value of Qatari gas to Europe is quite inflated. Its volume is reducing the competitiveness of Russian fuel commodities, but not yet to a great extent.

According to a report by experts at the National Bank of Qatar, by 2014, the emirate will reduce spot LNG supplies by at least 40 percent, primarily due to lower export volumes to the European sector. This will be due to the fact that Qatar has signed long-term contracts for the supply of natural gas to countries in Asia and South America, the completion of which will require large amounts of fuel commodities.

As a result of the projected decrease in the export of Qatari LNG to European markets there will be an increase in demand. Moreover, experts at Russia’s Gazprom predict that the long-term dynamic of a growing gap between Europe’s own gas production and its consumption will open up new opportunities for imports, including from Russia.

At the same time, in the future we should expect a strengthening of the European Union’s dependence on gas exporters. Europe has the opportunity to diversify suppliers, relying on an increased use of Qatari LNG, which over time could minimize the volume of Gazprom’s exports to European markets.

Apparently, as a result of increased production of LPG due to the lifting of the moratorium on the further development of Qatar’s North Field (North Dome) after 2014, and also due to the introduction of new re-gasification capacity in Europe, the emirate will more actively target this market, which would much more seriously affect the interests of Russian business.

Russian gas analysts believe that in the coming years, Qatar will provide Europe with an additional 50 billion cubic meters of gas per year, which is 5 percent of the EU gas market. If that happens, the following scenario is quite possible: Russia drops the price of its fuel a little, but increases its export volumes, and then things will become more difficult for Qatar.

For example, in 2011-2012, Gazprom reached an agreement with European consumers concerning the adjustment of pricing terms. As a result, the contract price formula of petroleum indexed products was modified, which greatly contributed to maintaining the competitiveness of Russian natural gas to European markets. Moreover, despite a more than 9 percent reduction in gas consumption in Gazprom’s key export markets, European buyers acquired 150 billion cubic meters of Russian natural gas, which was 8.2 percent higher than was acquired in 2010’s contracts.

It is worth noting that Gazprom is an active participant in not only long trades, but also in gas spot trading on markets in the United Kingdom, Belgium, France and the Netherlands, selling both Russian fuel commodities as well as volumes purchased in Europe.

Gazprom specialists predict that the company’s share in the European market could rise from its current quarter to a third of European consumption in 2030.

Eldar Kasayev is an expert on energy investments in the Middle East and North Africa, exclusively for the online magazine “New Eastern Outlook”.