LONDON: Russian oil major Rosneft will invest in gas pipelines in Iraq’s autonomous Kurdistan, expanding its commitment to the region ahead of an independence referendum to help it become a major exporter of gas to Turkey and Europe.

Kurdistan’s parliament approved a plan on Friday to hold a referendum on independence on Sept 25, ignoring opposition from Baghdad and the wider region as well as Western concerns that the vote could heighten tensions in the region.

Kurdistan has been exporting oil independently from Baghdad since 2014 and Kremlin-controlled Rosneft joined the list of buyers this year, lending the region hundreds of millions of dollars in loans guaranteed by future oil sales.

Now Rosneft is widening its investments to gas by agreeing to fund a natural gas pipeline in Kurdistan, Rosneft and the Kurdistan Regional Government (KRG) said on Monday. Two sources close to the deal said the investments would amount to more than $1 billion.

Erbil, the seat of the KRG in northern Iraq, needs money to fund the fight against Islamic State and ease a budget crisis caused by low oil prices.

Kurdistan has relied on oil pre-finance deals to improve its fiscal position but has struggled to develop its large gas reserves.

For Rosneft, the world’s largest publicly listed oil company by production, the deal is a major boost to its international gas ambitions. Rosneft has long sought to challenge Gazprom, Russia’s gas export monopoly, in supplying gas to Europe.

For Turkey, it means the arrival of new supplies for its energy-hungry economy and the potential to become a major centre for gas supplies to Europe.

Published in Dawn, September 19th, 2017