Kurdish Upstream Sector Hots Up

Kurdish Upstream Sector Hots Up

The restart of oil exports from the Kurdistan Regional Government (KRG) area has catalyzed investor interest in Iraq’s Kurdish north, with a string of new deals being struck as operators prepare for first production. Exploration activity is white hot, with OMV, Western Zagros, Aspect, DNO, Gulf Keystone and US independent Hillwood International all making commercial discoveries since the beginning of the year.

Hillwood, owned by former US presidential candidate Ross Perot, is the latest company to decide to start up production, an industry source tells MEES. Its Swara Tika-1 well on the Sarsang block, which it shares with Marathon (25%) and OMV (30%), struck oil earlier this year. It will join OMV (on its Bina Bawi block), ShaMaran (Pulkhana block), Gulf Keystone (Shaikan), Afren (Bardarash), and Western Zagros at its Garmian block (formerly Kalaar Bawanoor) as KRG operators who have or are planning to put into place early production facilities of 5,000-15,000 b/d capacity. With the possible exception of Afren, all these projects, if not already in place, should be fully operational by the end of the first quarter of 2012.

DNO should expand output at Tawke to 100,000 b/d by year-end and Genel Enerji is looking to boost capacity at Taq Taq to around 120,000 b/d by end-2011. Output at the Khurmala Dome, operated by private Kurdish firm Kar Group, should rise from around 70,000 b/d to 160,000 b/d within the next year. Sharjah-based Crescent Petroleum also produces around 15,000 b/d of condensate at Khor Mor (MEES, 4 July). A resolution to the KRG’s long-standing oil dispute with Baghdad does not appear imminent, but the region’s oil industry has acquired critical mass. Even former skeptics now find it hard to envisage Baghdad simply pulling the plug on what is a vital and growing source of federal Iraqi finance. It is noteworthy that US firm Hess, which in July announced it had won operatorship of two KRG blocks, was included in Baghdad’s list of 41 pre-qualified firms for its latest bidding round (MEES, 15 August). The federal Ministry of Oil has traditionally blacklisted firms that sign upstream deals in the KRG.

To date, Gulf Keystone’s Shaikan field is the stand-out success story of the KRG exploration bonanza, with gross oil in place volumes currently estimated at 4.86-10.8bn barrels. And on 18 August, the London-based independent announced a new discovery at Shaikan, with the Shaikan-2 well testing 4,450 b/d of 36° API oil. On 10 August, Gulf Keystone said an independent preliminary evaluation put proven plus probable (P50) oil reserves on its Shaikh Adi block at 1.9bn barrels. Further drilling has boosted reserves at Tawke, with DNO in July announcing a doubling of P50 reserves to 636mn barrels. In June, the Norwegian firm made a declaration of commerciality on its Erbil license. It estimates P50 reserves there at 136mn barrels (36mn barrels at its Benenan discovery and 100mn barrels at its Bastora discovery). A development plan is to be presented by year-end. In April it started drilling its first well, Summail-1, on its Dihok block.

Eyes On The South

The next source of KRG discovery announcements could be in the south of the region, where Western Zagros, Talisman and ShaMaran all are drilling or about to start. ShaMaran spudded a well at its Pulkhana block in April and Talisman has just started drilling at its K39 block, where a highly prospective structure is believed to be linked to Western Zagros’ Kurdamir gas discovery. One source tells MEES: “I don’t think it is just gas. I think it is going to be big, really big, and there is going to be oil.” On 2 August, Western Zagros announced that its Kalaar Bawanoor block, in which Talisman had a 40% stake, would be split in two, with Talisman taking over operatorship of the northern section, covering Kurdamir. Western Zagros retains its 40% stake in Kurdamir and operatorship of the southern section, named Garmian, which contains its Sarqala-1 discovery well. Talisman has relinquished its 40% stake in Garmian, giving the KRG some fresh acreage to award. MEES understands that the reasons behind this are linked to Talisman’s desire to renegotiate or reschedule a contractual payment to the KRG.

Firms that have been looking to get into the KRG upstream include: UK independent Melrose Resources; ConocoPhillips; Nigerian independent Sahara; and Oryx Petroleum, owned by Jean-Claude Gandur, who founded KRG investor Addax before it was sold to Sinopec. Repsol-YPF, previously linked with a KRG oil investment, has now made good on its ambitions. On 28 July the Spanish firm announced it had won the Piramgrun and Qala Dze blocks, following Hess, PetroCeltic and Afren as July entrants to the KRG oil sector (MEES, 1 August). Also on 28 July, Oil Search and ShaMaran announced they were exercising their option to convert their seismic contract on the Taza block (K42) into a full blown production sharing contract.

KRG Region Upstream Investors

Operator	Block	Partners	Contract Start Date	Oil Production	Notes
Afren	Bardarash	Komet (Ascom)	27-Jul-11	4,800 b/d†	Bought into Komet block July 11
Aspect Energy	Atrush	Marathon, ShaMaran	12-Nov-07		discovery 2011.
Aspect Energy	Arbat		Aug-09
Dana Gas	Khor Mor	50/50 Dana/Crescent	15-Apr-07	15,000 b/d	Condensate and gas field, producing 300mn cfd, service contract.
Dana Gas	Chemchemal	50/50 Dana/Crescent			Appraisal Contract.
DNO	Dihok	Genel Enerji, UI	Jun-04
	Erbil	Genel Enerji	Jun-04		Oil discovery.
	Tawke	Genel Enerji, UI	Jun-10	70,000 b/d	To go to 100,000 b/d by end-2011.
Dogan Energy	Erbil	New Age	Jun-09
Forbes & Manhattan	Kara Dagh (as Vast)		27-Jul-09		Investment vehicle. Operating under Vast and Longford.
Forbes & Manhattan	Chia Surkh (as Longford)	Genel Enerji , Petoil	27-Jul-09
Genel Enerji	Taq Taq	Sinopec (formerly Addax)	Jan-04	80,000 b/d	To go to 120,000 b/d by end-2011.
Genel Enerji	Kiwa Chirmila	Sinopec (formerly Addax)	Nov-06
Gulf Keystone	Shaikan	MOL, Texas Keystone	06-Nov-07	10,000 b/d	Major oil discovery.
	Sheikh Adi		Jul-09		Commercial discovery .
	Bar Bahar	Genel Enerji	Jul-09
Heritage	Miran	Genel Enerji , UI	02-Oct-07		Major Gas discovery.
Hillwood (HKN)	Sarsang	Marathon, OMV	12-Nov-07		Oil discovery.
Hess	Dinarta	PetroCeltic	27-Jul-11
Hess	Shakrok	PetroCeltic	27-Jul-11
Hunt	Ain Sifni	Afren	08-Sep-07		Ninevah Province. Afren bought in July-11.
KNOC (Korea)	Bazian	Various Korean firms	12-Nov-07
	Sangaw South		25-Jun-08
	Qush Tappa		25-Jun-08
	Hawler, Dimir Dagh, Zab, Khabat*		25-Jun-08
Komet (Ascom)	al-Qush		2009
Marathon	Harir		20-Oct-10
Marathon	Safen		20-Oct-10
MOL (Kalegran)	Akre-Bijeel	Gulf Keystone	06-Nov-07		Heavy oil discovery announced March 2010.
Murphy Oil	Central Dihok	PetroQuest	04-Nov-10		PetroQuest 30% stake unconfirmed.
New Age	Khalakhan	Dogan, Range Energy Resources	Jun-09
Niko	Kara Dagh	Forbes And Manhattan (Vast)	May-08
Norbest	Hawler (4 blocks)	KNOC (in K15 block)	12-Nov-07
OMV	Mala Omar		06-Nov-07		One well drilled. Not commercial.
	Shorish
	Bina Bawi	Petoil, Prime Natural Resources	Jan-03		Oil discovery 2011, OMV Bought into block 2010.
Oil Search	Taza	ShaMaran	Aug-09
Perenco	Sindi/Amedi		02-Oct-07
PetroQuest	Sulevani		N/A		Unconfirmed.
Prime Natural Resources	Shakal	Petoil, Oil Search	Jan-03
Reliance	Rovi	OMV	06-Nov-07		Testing.
Reliance	Sarta	OMV	06-Nov-07
Repsol	Piramagrun		Jul-11
Repsol	Qala Dze		Jul-11
ShaMaran	Pulkhana	Petoil	Aug-09		Lundin Subsidiary, formerly Bayou Bend, existing discovery.
ShaMaran	Arbat		Aug-09
Sterling	Sangaw North	Sinopec, KNOC	12-Nov-07		Unsuccessful.
Talisman	K39		19-Jun-08		Drilling.
Talisman	Kurdamir		Aug-11		W Zagros Kalaar Bawanoor block split into Kurdamir and Garmian July 2011. Also unconfirmed operatorship of Baranan block.
Western Zagros	Garmian		26-Feb-07		Oil discovery 2011.