The UK/Turkey Genel Energy is set to acquire a majority stake in the Miran block, further consolidating its position as one of the largest energy firms in the semi-autonomous Kurdistan region of northern Iraq and leading Turkey’s push into the country’s oil sector.

The gas block is currently operated by the London-listed Heritage Oil, which will divest its remaining 49 per cent stake in the Miran production sharing agreement.

The transfer of the stake is under the terms of a $294m loan provided by Genel to Heritage in August, but still requires approval from Heritage’s shareholders and from Ashti Hawrami, the Minister of Natural Resources for the Kurdistan Regional Government (KRG) before it can be completed. 

Heritage already completed the sale of a 26 per cent stake in the field on 22 August for $156m. It now will no longer have any stake in the block. Following approval, Genel will have 100 per cent ownership of block and will be its sole operator. The block contains an estimated 10.5 trillion cubic feet of natural gas, according to a March 2012 report by the UK’s RPS Energy Consultants, with as much as 3.75 tcf of gas and 161 million barrels of liquids recoverable.

The acquisition will add to Genel’s portfolio of 9 blocks across the northern region of Iraq, out of more than 40 production sharing contracts signed by the KRG since 2007. Its production capacity has increased to approximately 250,000 barrels a day (b/d), and the Tawke and Taq Taq fields, in which Genel has major interests, account for 90 per cent of the Kurdistan region’s crude sales.

In early November, the Oil Ministry expelled state-owned Turkish firm TPAO from a consortium, which was set to sign an exploration contract for Block 9 in the south of Iraq, a sign of worsening ties between Baghdad and Ankara. There are several factors souring the relationship, including Turkey’s growing ties with the semi-autonomous Kurdistan region of northern Iraq, as well as Iraq’s response to the conflict in Syria. A consortium led by Kuwait Energy Company won the contract for Block 9 in Iraq’s fourth licensing round in May. Kuwait Energy holds a 40 per cent stake in the block, with TPAO and the UAE’s Dragon Oil sharing the remaining 60 per cent interest.

TPAO also has stakes in the development of another four fields in Iraq: the Badra and Missan oil fields, and the Mansouriya and Siba gas fields. There has been no indication whether TPAO will be removed from these.

Genel may not be the only firm with Turkish connections interested in the Kurdish region for much longer. The Turkish government is now said to be in the process of establishing a new state-owned oil company, which would be used as a vehicle for investments in as many as five blocks in the region. As a growing regional economic and political power, the entry of a Turkish national oil company, along with previous investments from Russia’s Gazprom, France’s Total and US oil majors, Chevron and ExxonMobil, would present another major boost to the Kurdish oil sector and a challenge to Baghdad.