Oil drilling under way in Iraqi Kurdistan

[Aslan]

LONDON, June 19 (UPI) -- An oil company working in northern Iraq said Wednesday it was looking to confirm the region may be one of the best in the world in terms of resource potential.

British energy company Gulf Keystone Petroleum said it started operations for the Shaikan-7 exploration well in the semiautonomous Kurdish region of Iraq. The company said Shaikan-7 is its first deep exploration well, targeting natural reserves more than 2.5 miles underground.

Drilling is expected to take nine months.

"With Shaikan-7, we hope to confirm our expectations of major reservoirs beneath the deepest horizon drilled to date and add to what is already recognized as one of the world's largest onshore conventional oil and gas developments," Chief Executive Officer John Gerstenlauer said in a statement.

The company said the Shaikan oil discovery could hold as much as 10.5 billion barrels of oil. It expects to reach a full-scale production level of 150,000 barrels per day by 2015.

The central and Kurdish governments in Iraq are at odds over legal issues related to oil. As a whole, the International Energy Agency said Iraq could be producing 6.1 million bpd by 2020.



Iraqi Kurdistan gives Turkish company six oil exploration blocks

The report, co-published by The Oil & Gas Year and the autonomous Kurdistan Regional Government (KRG), is the first official confirmation of the deal. It said a company described only as "a Turkish entity" was given stakes in the Choman, Hindren, Arbat, Pulkhana, Jabal Kand and Khalakan blocks.

Resource-hungry Turkey and neighbouring Iraqi Kurdistan, rich in hydrocarbons, have been negotiating on energy since last year. However, the central government insists it has the sole authority to sign energy deals.

A Turkish Energy Ministry official declined to comment on the report published by Istanbul-based The Oil & Gas Year. A source at state company Turkiye Petrolleri (TPAO), Turkey's main oil exploration company, denied his company won the licences.

The Turkish entity will have 80 percent stakes in the Choman, Hindren and Arbat blocks, the report said.

Choman and Hindren are contiguous sections on the border with Iran, and Arbat is in the southeast near the city of Sulaymaniyah and has had some seismic work completed.

The entity will hold a 40 percent stake in Pulkhana in the south, where eight wells have been drilled, and Jabal Kand in the west. It is expected to be given a 40 percent stake in the Khalakan block in the east of Iraqi Kurdistan, the report said.

The ease of extraction and favourable production-sharing terms have attracted majors such Exxon Mobil Corp, Chevron Corp and Total SA to the Kurdistan region, despite threats of blacklisting from Baghdad, which considers the KRG contracts illegal.

The central government's refusal to pay for exports from the north has sharply reduced shipments, which are currently made overland by truck to Turkey.

Resolution of the dispute between the regional capital Arbil and Baghdad is essential if the Kurdish region is to reach its export goal of more than 1 million barrels of oil per day in by 2015.



Total acquires 80% stake in Kurdistan block

France's oil major Total has acquired an 80% stake in an exploration block in Iraq's Kurdistan, in a move that reinforces the company's position in the semi-autonomous region where crude reserves are plentiful, Reuters has reported. According to the deal, the Kurdistan Regional Government (KRG) will own the remaining 20%. "This participation in an operated exploration block was contemplated at the time Total made its move in Kurdistan during the summer 2012," Total said.





Petroceltic shares ‘significantly undervalued’ ahead of Kurdistan drilling

Petroceltic (LON:PCI) shares are significantly undervalued in the run up to potentially significant drilling in Kurdistan, says Dublin based broker Davy.
Drilling is expected to start on the Hess operated Shakrok exploration well in July.
Shakrok could potentially contain a hefty 650mln barrels of oil and, with a 20% stake in the exploration venture, a success would be very significant for Petroceltic.
According to Davy analyst Job Langroek, Petroceltic shares are currently trading at a 73% discount to the broker’s valuation, and the Kurdistan drilling presents a near-term catalyst to close at least some of this gap.
Accounting for the recent merger with Melrose and the subsequent share reorganisation Davy values the new Petroceltic as a whole at 530p per share; it currently trades at 145p.
The Kurdistan assets contribute just 20p of Davy’s current valuation, because they are viewed on a highly discounted ‘pre-drill’ basis.
But, Langbroek says, by applying a ‘more proactive’ valuation – of between US$1-3 per barrel, which is derived from corporate deals that have valued ‘discovered’ barrels in the region – implies the Kurdistan assets could be worth almost 60p a share.
As such, Davy sees the start of drilling in Kurdistan as a key event.
“The start-up of drilling creates the opportunity to unwind pre-drill risk. For instance, the largest target on the Shakrok block (104m bbls net) could justify the whole of Kurdistan pre-drill valuation alone.
“Hence, our belief that the start-up of drilling in Kurdistan should act as catalyst to closing the value gap.”
It is expected that Hess will, in the next six months, also move on to drill a well on the Dinarte block, which is the other asset in the venture.
The Hess-Petroceltic project is not the only drill programme getting underway in Kurdistan this summer, indeed several recent entrants are now getting boots on the ground, and the semi-autonomous region is expected to be particularly busy with several drilling projects being carried out over the coming months.
Importantly, export infrastructure projects, to build a pipeline through the north into Turkey, are at an advanced stage of development and it is thought that work could start on a second export pipeline soon.
The first pipeline will allow upwards of 150,000 barrels of oil per day to be exported from the semi-autonomous region, and it will dramatically enhance the commercial development of the large oil discoveries that are already known to exist in Kurdistan.
Only a few fields have thus far begun production, and those that are producing are trucking oil for export.
By opening up a material and sustainable export route, the key infrastructure project promises to enhance the region’s appeal to the wider oil industry.
Indeed, in recent days, America's Chevron and France’s Total bolstered respective positions in the region.
Chevron marked up its third asset in Iraq’s semi-autonomous region, acquiring the right to explore the Qara Dagh field. Elsewhere, Total has picked up the Baranan block, which was relinquished by Talisman Energy last year.
It is reported that Chevron will start drilling on its Sarta-2 well later this week and another well, Rovi-2, will start in July.
Anglo-Turkish firm Genel (LON:GENL) continues to develop its operations at the Taq Taq and Tawke fields, and it has four high impact wells in the schedule for 2013.
Afren’s (LON:AFR) drill programme, which confirmed a discovery in the Simrit 2 well in March, will continue with the drilling of Simrit-3 and two wells on the Maqlub prospect.
And Gulf Keystone (LON:GKP), one of the first movers in Kurdistan, confirmed on Wednesday that work has begun on the Shaikan-7 well, its first ‘deep’ well which is due to go down as far as 4,500 metres in search of light oil in Triassic reservoirs.