Russia’s Rosneft to take control of major Kurdish oil pipeline

CNBC

  • The deal is part of President Vladimir Putin’s bid to boost Russian influence
  • Investment in the pipeline is seen at $1.8 billion

Andrey Rudakov | Bloomberg | Getty Images

Russian energy major Rosneft has agreed to take control of the main oil pipeline in Iraq’s Kurdistan, further boosting its role as the main international investor in the semi-autonomous region.

The move is an apparent part of a broader strategy by President Vladimir Putin to ratchet up Moscow’s political and economic influence in the Middle East. It came amid the crisis in Kurdistan’s relations with the central government in Baghdad, which erupted after the region held an independence referendum last month.

Rosneft said its share in the project may total as much as 60 percent, while the current pipeline operator KAR Group will retain 40 percent.

Sources familiar with the deal said Rosneft’s investment in the project was seen totaling about $1.8 billion.

The deal comes days after Baghdad threatened to re-route a big chunk of oil flows towards an old oil pipeline, which has been out of operation for several years since Kurdistan built its own infrastructure to the Turkish Mediterranean port of Ceyhan.

The main lifters of the oil there are trading houses Vitol, Petraco, Glencore and most recently Rosneft via pre-financing deals.

Rosneft’s influential Chief Executive Officer Igor Sechin said on Thursday that Kurshish authorities and Baghdad have to resolve their differences by themselves.

Iraq, along with neighboring Iran and Turkey, has pledged to isolate Kurdistan in the wake of last month’s referendum.

That includes cutting off air and banking ties and reviving an old pipeline to Turkey to deprive Erbil of a big chunk of oil revenues.

Rosneft will be investing in expanding Erbil’s independent pipeline, which Baghdad has targeted, hoping to boost its capacity by a third to 950,000 barrels per day. That is the equivalent of about 1 percent of total global supply.

With Rosneft acquiring 60 percent in the project, the Kremlin oil major effectively becomes a controlling stakeholder in Kurdish oil infrastructure. That should give Erbil some sense of security as it faces unprecedented pressure from its neighbours.

Rosneft has already agreed to invest $400 million in five oil blocks in Iraqi Kurdistan.

It also had previously loaned Kurdistan $1.2 billion, guaranteed by oil sales, and is seeking to help Erbil build two major oil and gas pipelines.

Oil prices edge lower after strong third quarter

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  • Oil prices edged lower on Monday in early Asian trading after posting gains of as much as 20 percent in the third quarter
  • U.S. crude was down 2 cents at $51.65 a barrel
  • Brent crude for December delivery was down 6 cents at $56.73 a barrel

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David McNew | Getty Images

Oil prices edged lower on Monday in early Asian trading, pausing for breath after posting gains of as much as 20 percent in the third quarter, after a survey pointed to a slight increase in OPEC production in September.

U.S. crude was down 2 cents at $51.65 a barrel at 0057 GMT. The U.S. benchmark on Friday posted its strongest quarterly gain since the second quarter of 2016 and the longest streak of weekly gains since January.

Global benchmark, Brent crude for December delivery, was down 6 cents at $56.73 a barrel. On Friday, Brent for November delivery closed 13 cents higher at $57.54 a barrel, notching up a third-quarter gain of around 20 percent, the biggest gain in five quarters. It was the biggest third-quarter increase since 2004.

The contract reached its highest in more than two years early last week, and posted its fifth consecutive weekly gain. It was Brent’s longest weekly bull run since June 2016.

The price gains have been supported by anticipated demand from U.S. refiners resuming operations after shutdowns due to Hurricane Harvey.

But oil output from the Organization of Petroleum Exporting Countries (OPEC) rose last month by 50,000 barrels per day (bpd), a Reuters survey found, as Iraqi exports increased and production edged higher in Libya, one of the producers exempt from a deal to curb output and support prices.

Middle Eastern oil producers are concerned the recent price rise will only stir U.S. shale producers into more drilling and push prices lower again.

U.S. energy companies added oil rigs for the first week in seven after a 14-month drilling recovery stalled in August, energy services firm Baker Hughes said on Friday.

Drillers added six oil rigs in the week to Sept. 29, bringing the total count up to 750.