EU - IRAQ

EU looks to tap on Iraqi oil and gas

4 min

Iraqi Prime Minister Maliki is visiting Brussels in order to discuss greater European investment in the world's third largest oil reserves, with the EU seeking to reduce its energy dependency on Russia.

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The European Union and Iraq are close to signing an energy cooperation deal, EU Commission chief Jose Manuel Barroso said Wednesday, as Europe strives to reduce dependence on Russian oil and gas.

"It's only a matter of some weeks I believe to conclude these negotiations," on sealing a memorandum of understanding on energy cooperation, Barroso told reporters at a joint press conference with visiting Iraqi Prime Minister Nuri al-Maliki.

"These negotiations are going very well... there are already very concrete details now," Barroso added.

The deal could be sealed when Iraq's Energy Minister Hussain al-Shahristani visits Brussels for a conference in early May, he added.

The agreement will include European aid to reconstruct Iraq's war-hit energy infrastructure and stress "energy security" for both parties.

EU Energy Commissioner Andris Piebalgs, who had a working breakfast with Shahristani, said Iraq made a political "gesture of goodwill" and promised at least five billion cubic metres of gas in a first stage from its Akkas field near the Syrian border.

Baghdad also indicated that "probably there would be more in the future for the European Union," the Commission said in a statement, adding that the gas would flow to Europe "through various routes and potentially from various fields".

On oil, Iraq said it would increase its production from the current 2.5 million barrels per day to 3.0 million by the end of the year.

"The target is for 4.5 million by approximately 2012," the Commission statement said, adding "this should be a favourable contribution towards decreasing oil prices."

The price of New York oil on Wednesday struck a historic peak at 114.95 dollars.

Iraq, according to the Commission statement, is ready to sign the draft energy agreement "at any time".

The EU is seeking to assure energy supplies amid soaring oil prices and to reduce its dependence on supplies from Russia, which have not always proven reliable.

Iraq sits on the third largest oil reserves in the world, an estimated 115 billion barrels, but lacks the technology, capital and security to properly exploit its resource.

While the US-led war in Iraq split the EU politically, with the soaring oil prices the EU does not intend to leave the country's massive resources to the United States alone to exploit.

"It is certainly in our interests to diversify our suppliers," a commission source said.

The Europeans also want Baghdad to feed its planned Nabucco gas pipeline.

Nabucco is planned to be a 3,300-kilometre (2,050-mile) pipeline running from the Caspian Sea via Turkey and the Balkan states to Austria.

Construction is scheduled to begin in 2009, with the completion date set for 2013.

The pipeline will transport 31 billion cubic metres of gas to the energy-hungry EU from the Middle East and Asia so as to reduce the bloc's reliance on Russian supplies.

Iraqi PM Maliki said his country was close to adopting a key energy law to encourage investment, notably from the European Union.

"We are close to a definitive agreement on the law on oil and gas which would allow us to seal strategic partnership deals and develop investments," Maliki told the European parliament's foreign affairs committee during his visit to Brussels.

The energy law is considered an essential step for national reconciliation in Iraq and to help bring investments into the sector.

The draft law stipulates a fair distribution of oil revenues between Iraq's 18 provinces, a very sensitive matter in a country wracked by intercommunal violence.

International oil companies have hesitated to invest in Iraq without the law agreed and introduced.

The EU, already a major aid donor, is also continuing talks on a wider trade and partnership deal to stimulate trade with Iraq.

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