Kurdistan Oil & Gas Development

[kirkuk1]

Kirkuk's oil reserve is now tiny compared with KRG's oil reserve , but it doesn't mean KRG should give up on the people and the land ! , which has been Kurdish since the Baban dynasty era (medieval history) and Gutian ruling era (ancient history).

[alan131210]

24/05/2012

ERBIL, May 24 (AKnews) - Kurdistan's Prime Minister Nechirvan Barzani said that Baghdad's treatment towards the region means the Kurds have no option but to export oil to secure their future needs, according to a statement.

The PM added that Baghdad should deal with the region according to the principles of the constitution and national partnership and not deprive the Kurds of their fuel share.

In a meeting of the Kurdistan Council of Ministers Barzani said the amount of fuel allocated by the Iraqi government to Kurdistan since the beginning of this year does not fill the daily needs of the region's citizens. He said the volume of fuel is not enough to run factories and power plants.

The PM criticized Baghdad's policy towards the region regarding fuel shares, adding that Baghdad should not follow in the footsteps of the former regime.

The Kurdistan Regional Government sought to meet the fuel needs of its citizens through its domestic activities and bring fuel from abroad, said Barzani.

AKnews

[alan131210]

May 24, 2012

LONDON, — WesternZagros is about to join forces with a large European oil company in Iraqi Kurdistan, the company's chief executive said, enhancing the Canadian explorer's ability to expand production and reserves in the year ahead.

Simon Hatfield, speaking to Reuters on Wednesday, said WesternZagros's giant Garmian block was part of a major Kurdish oil play by the European company, which he declined to identify.

Industry sources say the company is most likely Total . The French oil major has said it is considering possible investment in the semi-autonomous region, after ExxonMobil signed up for six exploration blocks late last year.

"Our Garmian block would be the single biggest piece," Hatfield said. "We're relying on getting about $55 million in back costs from the large European partner we're about to get, which will give the company funding through next year."

A new Kurdish deal with Total would fan the flames between Erbil and Baghdad, locked in a long-running feud over oil and land. Total, like Exxon, is also developing a major oilfield in southern Iraq. Baghdad says any contract signed by Arbil is illegal.

The assets of Kurdistan-focused WesternZagros - the Garmian and Kurdamir blocks near the border with Iran - could potentially contain reserves of 5 billion barrels.

It holds a 40 percent stake in each block's production sharing contract and operates Garmian. Erbil now holds the remainder and has been negotiating with the European party for the past six months over a 40 percent stake, said Hatfield.

The veteran oil explorer expects the deal to be finalised in the next month for Garmian, which potentially holds recoverable oil reserves of 1.7 billion barrels and is producing up to 6,000 barrels per day (bpd) from the Sarqala-1 well.

Shares of Calgary-based WesternZagros were trading at 88 Canadian cents, down 3.3 percent. The stock has risen from 67 cents at the end of 2011.

The unidentified European major will eventually take over as operator, Hatfield said.

"They had their lawyers in Calgary last week doing their final legal due diligence with our lawyers," he said. "But ours is not the only deal this company is looking at - that's why it's taking so long."

As many as six blocks could be included in the package the European major wants to present to its executive committee.

"It's a big company and they want a material position," said the chief executive. "There's not a lot left, so they've got to piece it together."

On the ground in the northern region since 2004, WesternZagros says the neighbouring Kurdamir block potentially contains recoverable oil reserves of 1.5 billion barrels.

"We were part of the early movers in Kurdistan and now it's a very crowded space," said Hatfield.

As a result, there's a high price to pay for entry.

Arbil is asking for a bonus of close to $100 million for Garmian, plus a percentage - believed to be around 20 percent - of the European company's profit oil allocation that will be dedicated to infrastructure development.

KURDISH PROMISE

Until the end of last year, Kurdistan had been a no-go area for oil majors with mega-contracts to develop Iraq's supergiant southern oilfields who feared the wrath of Baghdad.

But Kurdistan's potential and attractive contracts are coming up in boardroom discussions as the central government's oil programme gets bogged down in red tape and infrastructure bottlenecks.

"There are a number of other large European companies looking very hard at Kurdistan - they're all a little bit late," said Hatfield.

"Like ExxonMobil, they all held off now they're seeing the contracts in the rest of Iraq are not working out that well and the contracts in Kurdistan are actually working out quite well - although the export issue has to be resolved."

An intense wrangle between Iraq's central government and the Kurdish region over export rights for Kurdish oil has kept many of the world's top players away from the region.

Hatfield said WesternZagros, which has a market capitalisation of $330 million, would push ahead with development regardless.

"Either this gets resolved the way it should - the federal petroleum law gets passed and the Kurdish region gets open access to exports through the federal system. Or the Kurds will go alone with the support of Turkey," he said.

For now, the company has had no issues with payment for its sales of Sarqala crude, which netted $12.9 million last year. And a $25.9 million target for the first quarter of this year was met.

"We have had no issues meeting the targets and no issues selling our oil on the domestic market," said Hatfield. The company sells the light crude on monthly contracts and gets paid in advance by the local refineries.

"We monitor where our oil goes and it goes to local topping plant in Kurdistan where they take off the light ends - and that's worked very smoothly," he said.

Iraq's Deputy Prime Minister for Energy Hussain al-Shahristani has said most of the oil produced in Kurdistan is being smuggled across borders, mainly to Iran,www.ekurd.net instead of fulfilling its export obligations.

Hatfield said the company was looking to further develop its Kurdish assets and was not looking be bought out. The Abu Dhabi National Energy Co bought a 19.9 percent stake in the explorer late last year.

"We're funded to carry on. We believe the next few wells we're going to drill will not only dramatically increase production, but dramatically increase the proven reserves that we have," he said.

"Now is not the time to sell the company."

Reuters

[alan131210]

[alan131210]

25/05/2012
 
By Joel Wing

In 2009, Iraq held two rounds of auctions for international energy firms to bid on its oil fields. That resulted in the return of foreign companies to Iraq’s petroleum industry after a decade long drought, because of international sanctions. Afterward, Iraq announced that it would reach 12 million barrels a day in capacity by 2017. If that was accomplished it would be one of the greatest expansions in world history.

Unfortunately for Iraq, no one believed that figure was possible. Now, Shell, one of the firms that successfully participated in the 2009 bidding, is in talks with the Oil Ministry to reconfigure its deal. It wants to reduce its production target, and extend its timeline by several years. If it accomplishes that, all the other oil companies working in Iraq are likely to want to renegotiate their terms as well.
Shell is developing the Majnoon field in Basra, but is in talks with the Oil Ministry to change its contract. Shell originally won rights to the bloc in December 2009, putting in a winning bid with Malaysia’s Petronas. The two agreed to produce 1.8 million barrels a day by 2017.

Currently, Majnoon is pumping 65,000 barrels a day. Shell wants to reduce its production target to 1 million barrels a day, and extend the date that’s to be reached by twenty years or more. The company would also like to reduce its investment in the field from the original amount of $50 billion to around $40 billion. Shell has already spent $1 billion on the field since 2010, and plans on investing another $1 billion this year. The corporation has already met with Iraqi officials once in March 2012, and is supposed to meet again in May in Lebanon. The Oil Ministry seems to be open to Shell’s proposals, but will not budge on the remuneration fee of $1.39 per barrel. The production goals and dates were based upon the bidding that took place in 2009. The oil companies worked out fees and numbers with the Oil Ministry until they got to a point where they thought they could make a profit. They were not based upon any sound analysis of the fields, the country’s infrastructure, Iraq’s needs or anything else substantive. That’s how Iraq came to claim it could reach 12 million barrels a day in capacity by 2017, even though no one believed that was possible. Deputy Premier Hussein Shahristani, who is in charge of Iraq’s energy policy, has already officially dropped that mark to 11 million barrels by 2020, but the Oil Ministry has talked about cutting that even more to 8-8.5 million barrels. Some analysts and oil company executives believe that a more realistic figure might be 6 million barrels a day. From the start, Shell knew it could not reach the numbers it set in its 2009 bid.

It went ahead anyway, because it wanted to get into the Iraqi market along with all the other firms, because of its huge, untapped potential. Some believe that Iraq has enough petroleum reserves to maintain international prices in the future as demand increases, and other countries cut back on their production. There was no way that Shell was going to miss out on that. After it started work in Iraq, reality kicked in, and that has led it to enter into talks with Baghdad to change its deal.

Shell’s negotiations could lead to revising all of Iraq’s oil contracts. Companies have complained about the work environment in the country due to red tape holding up everything from visas to equipment shipped into the country. Some companies have gotten into payment disputes, and Iraq lacks adequate infrastructure, and what it has is aging. That causes bottlenecks, such as not having enough pipeline or storage capacity to deal with all the increased production that the foreign companies have achieved so far.

Many of the fields along the border with Iran also need mine clearing due to unexploded ordinance from the Iran-Iraq War. If Shell is successful in their bargaining, it is likely that all the other companies that signed deals in 2009 will ask to change theirs as well. That will lead to more realistic figures for Iraq’s oil industry, and give the companies breathing room, because they were facing penalties if they did not reach their marks. Deputy Premier Shahristani has already talked about coming up with new numbers based upon conversations with energy executives, so Baghdad is open to these revisions. It’s just a matter of time then, before Shell is likely to emerge with a reconfigured contract, with others following suit.
The two bid rounds for Iraqi oil fields in 2009 were as much a development story, as a political one. Iraq wanted to announce that it was returning as a major player in international markets after years of wars, sanctions, and the U.S. invasion.

Its claim that it could reach 12 million barrels in capacity was as much a political statement to that affect as anything else. No other country has ever been able to produce that much in such a short amount of time, so analysts were always skeptical, but the headlines still went around the world, which was what Baghdad wanted. Now after a few years of actual work in Iraq, companies are slowly going to the Oil Ministry asking for new terms. Shell is the first one to officially do so, and could set the standard for all the others. The results will be much more realistic numbers for how much oil Iraq is likely to produce in the future.

That doesn’t mean Iraq will still not have large growth, and play a more important role in OPEC, it just won’t be as big as some originally claimed.

*With an MA in International Relations, Joel Wing has been researching and writing about Iraq since 2002. His acclaimed blog, Musings on Iraq, is currently listed by the New York Times and the World Politics Review. In addition, Mr. Wing’s work has been cited by the Center for Strategic and International Studies, the Guardian and the Washington Independent.

AKnews 

[burnsss]

I dont understand why krg havent build oil refineries. Is it the same old bagdad dog barking? We have crude so why not refineries?

[alan131210]

I dont understand why krg havent build oil refineries. Is it the same old bagdad dog barking? We have crude so why not refineries?

KRG does have 2 refineries (Khabat in Erbil and Bazian in Sulaimani) and one is near completion , but its not enuff to fill in local demand

Kurdistan Refinery to Start Selling Gasoline: Ministry Official
http://www.bloomberg.com/news/2010-12-0 ... icial.html

Khabat Refinery to Output Automobile Petrol Next Week
http://www.iraqenergy.org/news/?detailo ... Next-Week-

Khabat Refinery - Erbil

http://www.kargroup.net/refinery.html

Bazian refinery - Sulaimani

http://www.qaiwangroup.com/refinery

[burnsss]

KRG should build enough for local demand, and also develop agriculture so bagdad tricks wont work on us.

[sheytanElKebir]

those are simple topping plants. Kurdistan acutely needs a proper grass roots refinery to produce the full range of products both for local demand and export.

I presume, after constructing the pipeline to Turkey, this would be the next priority step.

[jjmuneer]

Yeh right now sadly we are highly dependant on foriegn companies not just on our oil development, but other industries aswell.

[sheytanElKebir]

Guys, sheytan doesn't have any bad intentions here, even I disagree with him a lot, but you don't see me insult him... though sheytan, I got to say, most of the stuff you disagreed with me came out in my favor i.e. your opinion was that big oilies would not isolate baghdad for Kurdistan, yet the opposite happened, having said that, sheytan has much more information in regards to Kurdistans military than I do, which is why I never try to refute him here unless I'm positive about something. Sinjar on the is a fool in my view and will continue on the path to foolishness.

i thought I'd reply here! more on topic.

Well I was as surprised as anyone about Exxon's development in Kurdistan. I think its a great move for Kurdistan (to get a proper oil firm in) and a brave move for Exxon. I think Iraq should simply accept the new status quo to be honest (I had actually posted more on this topic on SSC Iraq, donno if you read it). Still I don't agree about the PSAs! but that's a different topic. Perhaps Kurdistan plan to "nationalise" them after a few years and negate the potential negative cash outflows... who knows?

[alan131210]

i thought I'd reply here! more on topic.

Well I was as surprised as anyone about Exxon's development in Kurdistan. I think its a great move for Kurdistan (to get a proper oil firm in) and a brave move for Exxon. I think Iraq should simply accept the new status quo to be honest (I had actually posted more on this topic on SSC Iraq, donno if you read it). Still I don't agree about the PSAs! but that's a different topic. Perhaps Kurdistan plan to "nationalise" them after a few years and negate the potential negative cash outflows... who knows?

yes indeed , PUK and Gorran MPs in Kurdistan parliament have urged the same thing few days ago , to have Kurdistan oil company , to nationalize the oil and make a social security system for every single person in KRG.

[burnsss]

Nationalizing oil would mean suicide, we dont have the expertise nor the huge investment needed to develop. The socialist can dream on til we have an independent state and a working industry. How would we lure in exxon with a stupid socialist in charge? International socialist doesnt give crap about kurds nor kurdistan, they are busy protecting 1.5 million palestianins from the evil zionist and the great satan of USA 40 million kurds doesnt bother them at all since we are somehow involved in some kind of zionizt plot..

[alan131210]

Nationalizing oil would mean suicide, we dont have the expertise nor the huge investment needed to develop. The socialist can dream on til we have an independent state and a working industry. .

i think you are been a bit slack bra gyan . We do have the expertize i personally know Dr Rebwar who has master in oil petroleum and who invented oil refinery with water and whom was awarded by former Australia PM John Howard , he lived in Perth Australia has returned to KRG and is working on nationalizing our oil as well as establishing Kurdistan oil company , i wanted to make it a surprise but you made me blow it , along with 3 more of them who has return from EU . I myself now am studying for Petroleum engineering .

and we have a huge funding coming from the sale of the oil , soon to be $2 million bpd which will give KRG $100 billion yearly budget , isn't that big enuff to you my dear !?

i am now enrolled at NSW University - major: Petroleum engineering , will be starting from the new year , i am so excited i cant wait to start .

my Uni
http://www.petrol.unsw.edu.au/

[sheytanElKebir]

i mean oil nationalisation is not something that will happen in the next 4-5 years. its something that has to simmer until the "right moment" when Kurdistan is in a position of strength.