The United States is holding talks with Iraq and Turkey to drum up investment to restart Iraqi gas production and exports to Europe, a U.S. official said on Wednesday.
"It could be linked up to the [Azeri-Turkish] Baku-Erzerum pipeline," U.S. State Department Deputy Assistant Secretary Matthew Bryza told a conference in Baku.
Azeri president Ilham Aliyev told the same conference on Tuesday his country will increase gas output to 16 billion cubic metres in 2008 from 12 bcm this year and start large-scale exports to Europe via the Baku-Erserum pipeline.
The pipeline will get most of its volumes from the giant Azeri Shakh-Deniz field on the Caspian Sea, operated by BP and Norway's Statoil and involving Russia's LUKOIL, France's Total and Iranian and Turkish state oil firms.
Channelling Iraqi gas through the pipeline would add a new source of gas to Europe's supply mix and weaken the dominance of Russian gas monopoly Gazprom, which will increase its 25% share of the European market in decades to come.
It could also provide gas for the Nabucco pipeline, European project which is under threat because of Gazprom's boycott and Russia's control of gas flows from Central Asia.
An industry source told Reuters in March that Turkish firms TPAO, Botas and Tekfen and Royal Dutch Shell had set up a consortium to bid for a gas production licence in Iraq and build a pipeline to Turkey's energy hub of Ceyhan.
The pipeline would run parallel to an existing oil pipeline from Iraq's Kirkuk to Ceyhan on the Mediterranean.
Turkey has a complex relationship with the mainly Kurdish north of Iraq. Its army generals and politicians have sometimes threatened to take military action to crush separatist Turkish Kurdish rebels hiding in the mountains there.
But despite such political tensions, more than 600 Turkish firms are operating in northern Iraq. Analysts say Turkish exports to the Kurdish government there, including fuel, totalled about $5 billion in 2006 alone.
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