Kurdistan Oil & Gas Development

[alan131210]

BAGHDAD, — When Iraq's Deputy Prime Minister Hussain al-Shahristani met Exxon Mobil executives in Baghdad two months ago, he could hardly control his emotions. His anger boiling over, the Iraqi oil chief threatened to kick the Americans out of the country.

With Exxon and other foreign oil majors upsetting Baghdad by signing exploration deals with autonomous Kurdistan region, Shahristani's rage was not hard to understand.

But barking threats at Exxon may be all Baghdad can do.

Foreign oil firms and autonomous Kurdistan have tested Shahristani's patience for months by drawing up oil accords the central government dismisses as illegal. Baghdad insists it alone has the right to export Iraqi crude.

Nine months after U.S. troops left, the oil contracts dispute is part of a broader political feud between the Baghdad government and Kurdistan over oil rights, territory and regional autonomy that is straining Iraq's uneasy federal union.

Other majors Chevron, Total and Gazprom have joined Exxon with their own deals in Kurdistan, provoking warnings from Baghdad their southern Iraqi oil deals with the federal government might be at risk.

But the might of Exxon has caught the oil ministry in a bind and officials say privately any action against the firm is unlikely in the near future. With few assets exposed to Baghdad, other majors in Kurdistan may also escape unpunished.

Exxon operates West Qurna-1, the 8.7 billion-barrel field in southern Iraq, producing 406,000 barrels per day, and earning a healthy chunk of Iraq's central government petrodollars.

"We have to think twice about pushing Exxon out of West Qurna. It's the operator of a field with crucial output. It's a problem, a big problem for us," said a senior oil official who was involved in drafting the West Qurna contract.

FRUSTRATED BAGHDAD

Executives from Exxon Mobil would have known even before the July meeting with Shahristani that they had angered the Baghdad government, but analysts say it was a deliberate calculation as they played rival interests in Iraq off against each other.

Exxon was the first company to flex its muscle and challenge Baghdad's authority by independently signing for six blocs to explore for oil with the Kurdistan Regional Government (KRG) in October last year.

Eager to rebuild its dilapidated infrastructure, Iraq has signed a series of contracts with foreign companies that target total oil production capacity of 12 million barrels per day (bpd) by 2017, up from about 3 million bpd.

Most analysts now see 6 million to 7 million bpd as more realistic.

The Exxon dilemma has left Shahristani in a difficult position. Iraqi frustration was clear in Shahristani's dealings with Exxon, according to sources aware of the recent talks.

"It was a really tense meeting. Shahristani was tough with Exxon's officials and warned them angrily they could lose the West Qurna contract if they started work in Kurdistan," an industry source told Reuters.

"The atmosphere heated up when Exxon said they would consider legal action."

COMPLEX POLITICS

Yet the complex politics of Iraq may also shield Exxon.

The oil row is just the latest complication in a long-running and deep-ranging dispute between Iraq's Shi'ite Prime Minister Nuri al-Maliki in Baghdad and Kurdistan's President Masoud Barzani based in its capital, Arbil.

Maliki has gone as far as asking U.S. President Barack Obama to force Exxon to pull out of the deal, claiming the firm's actions are a threat to peace.

"The oil ministry isn't the party to decide what to do with Exxon now because it's become a political issue," another oil ministry official told Reuters.

Analysts and officials say Exxon has been clever, playing Baghdad and Arbil off each other with aplomb.

The tactic: securing lucrative deals in Kurdistan while sending signals to Baghdad that it may freeze its huge operations in the south.

"It's obvious to us that Exxon put the Kurdistan deals in its pocket, then sat back and crossed its arms waiting to see what Arbil and Baghdad would do," said an oil ministry official.

Some analysts say the firm is deliberately exploiting the political situation.

"Exxon chose the perfect moment to jump into Kurdistan and take advantage of the disputes over everything between Arbil and Baghdad," Baghdad-based oil analyst, Hamza al-Jawahiri, said.

The OPEC member has no binding hydrocarbon law more than nine years after the toppling of Saddam Hussein. Final passage of a 2007 draft has been delayed by political infighting, which has also played into the hands of Exxon and the other firms.

"The lack of an oil law has helped to open a narrow path for oil companies into Kurdistan. They had the foresight to realize that any eventual agreement will make them a winner at the end of the day," said Ali Shallal, an Iraqi legal expert who specializes in drafting oil contracts.

Kurdistan has enjoyed more stability and security than the rest of Iraq, and its potential resources have already drawn smaller oil players such as Norway's DNO and Gulf Keystone. But its bickering with Baghdad had kept majors away until now.

That some companies are unhappy with Baghdad's contract terms has not been lost on Arbil. Foreign firms already consider the production-sharing deals in Kurdistan a far better arrangement than Baghdad's fee-for-service contracts. Some are already seeking to renegotiate.

"They will most likely have a stronger hand than they did when the auctions were first launched," said Samuel Ciszuk, an oil consultant at UK-based KBC Energy Economics.

Whether Kurdistan will use the deals to try to push for more independence remains to be seen. But it is already looking to have its own export pipeline to the Turkish port of Ceyhan by 2014, aiming to reduce its energy reliance on Baghdad.

The knotty regional politics involving Iraq, Kurdistan, Turkey - further complicated by the conflict in neighboring Syria - means that is not yet a sure thing.

For now, though, there are no signs of foreign companies backing away from their new relationships with the Kurds.

"Exxon and the other firms have realized the only way to offset the modest profits generated from Baghdad deals is to invest in Kurdistan for extra profits and less risks," Ali Shallal said.

[alan131210]

ERBIL, September 8 (AKnews) – The Kurdistan Region's oil plan is to produce one million barrels of oil per day over the next couple of years and this size of production will end the political dispute between Iraq and the region, said Genel chief executive Tony Hayward.

Hayward said: "The scale of the opportunity for Kurdistan and for Iraq is so large that there will be a resolution.
"We’d like to be exporting and believe strongly that over the next year or so, if not well before, that resolution will be arrived at."

Kurdish oil field Taq Taq is producing 105,000 barrels of oil per day (bpd). Tawke is running at 70,000 bpd, but should be up to 100,000 bpd by the end of the year, said Hayward.

Erbil and Ankara agreed to build an export pipeline, which could be operational next year, to transport one million barrels of oil per day to Turkey. The Kurdistan Regional Government (KRG) started trucking exports of crude oil to Turkey at the beginning of July despite a long-running dispute between Baghdad and Erbil.

Earlier the KRG set the end of August as a deadline for making payment, said a KRG statement.

The region restarted oil exports temporarily for a month during August after halting exports in April over a payment dispute. Then later the KRG decided to extend its oil exports to September 15 to give more time for discussion with Baghdad, said the region’s minister of natural resources.

Ashti Hawrami said: "We are in ongoing discussion with the Iraqi government about paying the foreign companies’ money so the region can continue exporting oil and increase the volume of exports.”

Baghdad has not paid Genel and a number of small companies yet for the majority of oil exported in 2009 and 2011, reported Reuters.
The region wants to end the payment dispute with Baghdad. According to the KRG, Baghdad has to pay $1.5bn to companies making investments in the region.

During the last few months, ExxonMobil, Chevron and Total signed contracts with the region to invest in the oil sector and neglected Baghdad's threats and warnings, reported the Financial Times.

Exxon Mobil signed six oil contracts last year with Kurdistan. The contracts led to strong opposition from Baghdad, which says Kurdistan is not authorized to sign contracts for its oil. The Iraqi government later threatened to blacklist oil giants if they continue their contracts with the KRG.

[jjmuneer]

Just nationalise 65% of the oil industry in Kurdistan, and the remaining is monitored by the KRG.

[alan131210]

(Reuters) - Iraq and Kurdistan both have too much at stake not to settle their dispute over oil, although they may take a year or so to do it, the head of the largest producer there said.

"The scale of the opportunity for Kurdistan and for Iraq is so large that there will be a resolution," Genel Chief Executive Tony Hayward, former boss of BP, said in an interview.

"Over the next year or two, Kurdistan production capacity will grow towards 1 million barrels a day - that's too much oil to be shut in as a consequence of a political dispute. So one way or another, it's going to get resolved."

Kurdistan's oil can be shipped to world markets through a Baghdad-controlled pipeline from Kirkuk to the Turkish port of Ceyhan.

The Kurdistan Regional Government (KRG) halted exports in April in a dispute over payments from Baghdad to companies working in the region. It restarted them, but warned it would cut shipments by mid-September if there were no progress on payments.

"We'd like to be exporting and believe strongly that over the next year or so, if not well before, that resolution will be arrived at," Hayward said in the telephone interview.

London-listed oil explorer Genel, the first to arrive in the mountainous region, has complained that it has not been paid for the majority of oil exported in 2009 and 2011. Other operators have voiced similar grievances.

But Hayward said if exports were to stop, production from the Taq Taq and Tawke oilfields - where it is involved - would be sold into the domestic market.

That local business - which fetches about $60 a barrel, well below that on world markets - would be enough to keep both projects in the money. "Very much so," he said.

Taq Taq is now pumping 105,000 bpd. Tawke is running at 70,000 bpd, but should be up to 100,000 bpd by the end of the year.

Baghdad says it has the sole power to export oil. But Kurdistan has signed exploration oil deals with foreign companies, contracts Baghdad says are illegal.

Taq Taq and Tawke are the backbone of KRG exports, between them contributing roughly 80,000 barrels per day of an overall 120,000 bpd. Khurmala, the northernmost part of the giant Kirkuk oilfield, makes up the remainder.

A new pipeline linking Taq Taq to Khurmala - the entry point to the Iraq-Turkey pipeline - is expected to be up and running by October, easing delivery of the oil to world markets. Crude from the field is now transported by tanker trucks.

"If there's an agreement between Baghdad and Erbil to continue exports, then Taq Taq will be tied directly to the export infrastructure," said Hayward.

In the meantime, KRG energy minister Ashti Hawrami - aiming to reduce the region's energy reliance on Baghdad - is carrying out plans to export oil and gas directly to Turkey, just to the north.

GAS PROSPECTS

Apart from its oil plays, Anglo-Turkish Genel - its longer term sights on Turkey's gas market - is also building up its position in Kurdish gas. It splashed out $450 million last month on a stake in the Miran gas discovery and also acquired a piece of the Bina Bawi gas discovery.

"The Kurdistan Regional Government has made it very clear that they would like to see gas in Kurdistan exported to Turkey, so building a gas business in Kurdistan focused on both the domestic market in Kurdistan but also the Turkish export market makes a great deal of sense," said Hayward.

Genel spent more than $700 million last month to bolster its position in Kurdistan. Hayward said the company could take on more, but acknowledged that options were now limited.

"If we see opportunities where we can create a lot of value, then we'll continue to add," he said. "But there's been a lot of consolidation in the course of the last nine months and the opportunity set is undoubtedly diminishing."

The Genel chief has also been trying to diversify the firm's sources of oil, recently taking acreage in Morocco and Malta. It has earmarked around $1 billion to buy further assets.

"We've said we'll focus on the Middle East and Africa and that's what we're doing," said Hayward. Genel was formed last year when Hayward and financier Nathaniel Rothschild's bid vehicle bought Turkey's Genel Enerji.

In Kurdistan, Hayward expects to see further consolidation. Oil majors Chevron (CVX.N), Total (TOTF.PA) and Gazprom (GAZP.MM) have joined Exxon (XOM.N) with their own deals in there, provoking warnings from Baghdad that those with oil deals with the federal government might be at risk.

"The supermajors have moved in - we haven't got much room for many more, frankly," he said.

"We'll see further consolidation and the emergence of half a dozen serious operators - of which Genel will be one."

reuters

[alan131210]

New Kurdistan pipeline under construction operational by August 2013

(reuters) - Kurdistan is taking its first steps towards gaining independence from Baghdad in the sale of its oil and gas with a convoy of trucks taking the condensate liquid fuel bi-products of a remote gas field directly into Turkey.

At least 15 trucks a day are loading up with high quality condensate at Khor Mor's gas plant and then trundling down a bumpy road to start the two-day journey to Mersin on the Turkish Mediterranean.

In return, Turkey is trucking back small quantities of diesel fuel and kerosene to use in the autonomous region's power plants.

"It's a very simple but symbolic start to direct oil trade between the Kurdistan Regional Government (KRG) and Turkey - and there will be more to come," said an official familiar with the barter-type operation between private companies.

"Neither side is thinking about stopping."

But Baghdad wants them to. It believes Iraq's central government has the sole right to export oil and gas produced throughout Iraq and says deliveries by truck from Kurdistan across the border into Turkey are illegal.

Ankara is meanwhile encouraging the swap, which kicked off with five tankers in July. And Turkish Energy Minister Taner Yildiz says the volume could gradually build up to 200 trucks a day - roughly 40,000 barrels per day (bpd).

Industry sources say the KRG is now supplying only Khor Mor condensate, but crude oil from other fields will also be exported.

"Turkey believes that Kurdistan's export of oil and gas does not run contrary to Iraq's constitution," said the official, who asked not to be named. "And Turkey is a logical exit route for the KRG," he added.

The KRG's oil can be shipped to world markets through a Baghdad-controlled pipeline from Kirkuk to the Turkish port of Ceyhan.

But this has been a stop-start process over the years due to a long-running feud between Baghdad and Arbil, the KRG's seat of government, over oil and land rights.

The KRG halted exports in April in a dispute over payments from Baghdad to companies working in the region. It restarted them in August, but warned it would cut shipments by mid-September if there was no progress on payments.

For now about 120,000 barrels a day of KRG oil is being exported through the Iraq-Turkey pipeline and the KRG's energy minister Ashti Hawrami says the region's oilfields could ship up to 200,000 bpd. The central government exports roughly 2.4 million bpd, with much of that coming from Iraq's southern oilfields.

At around 3,000 bpd, the condensate flow from Kurdistan's Khor Mor field to Turkey is a mere trickle. But if it's sold on the world market from Mersin, this very valuable product could fetch over $100 a barrel, say oil market sources.

Khor Mor - developed by the UAE's Crescent Petroleum and Dana Gas, alongside Austria's OMV and Mol of Hungary - supplies gas for power stations in the Kurdistan region, produces liquefied petroleum gas (LPG) and pumps out up to 17,000 bpd of condensates.

Erbil is also routing some of the condensate volume to Khurmala, where it is exported through the central government's Iraq-Turkey pipeline system, industry sources say.

Technicians at Khor Mor declined to comment on the final destination of the condensate because Kurdistan's Ministry of Natural Resources is in charge of the marketing effort.

Kurdistan began its crude-for-products trade with Turkey in order to help plug a product shortfall it says was created by Baghdad. It receives only 15,000 bpd of fuel from southern Iraq, far below its 140,000 bpd allocation, according to the Kurdistan government.

But Turkey's delivery has been slower than hoped, with the first products crossing the border at the end of last month, say industry sources. The process got bogged down in bureaucracy.

Ankara has increasingly courted KRG's Kurds as its relations with the Shi'ite-led central government in Baghdad have soured. Turkey is a major investment and trading partner for Iraq, especially for Kurdistan.

With open support from Ankara, Kurdistan has plans to begin exporting its oil along a new 1 million bpd pipeline to the Turkish border by August 2013. Production from the region is expected to rise towards the 1 million mark by then.

"The KRG needs the infrastructure - they can't have trucks bumper-to-bumper on the roads," says an oil industry source in Erbil. (Editing by Greg Mahlich)

[alan131210]

11/Sep/12

PNA - Norwegian oil firm DNO has found oil in Kurdistan region in the Bekhme formation at a depth of around 2,000 meters, it said in a statement on Tuesday.

It added that further testing on the Benenan-3 well was required to assess the discovery.


More oil for our future

[alan131210]

Khurmala oilfield

11/Sep/12

PNA - As Baghdad ignores Erbil’s concern over a pay dispute, KRG has reportedly halted around 75,000 to 80,000 barrels per day (bpd) of crude flow from the Khurmala oilfield since Monday night, Reuters reported.

"As of yesterday evening, the flow of crude was halted from Khurmala oilfield. We are not sure if it is for technical reasons or a planned stoppage," Iraqi oil ministry sources said on Tuesday.
 
Before the stoppage, total oil flow from Kurdistan was around 115,000 to 120,000 bpd.
 
Kurdistan has threatened to halt its share of national oil exports again on Sept. 15 over a pay dispute with Iraq's central government as Baghdad stopped paying foreign companies working in Kurdistan region.

[alan131210]

HOUSTON, Sept. 13

By OGJ editors

A group led by General Exploration Partners Inc. has tested the Atrush-2 appraisal well in the Kurdistan Region of Iraq at the combined rate of 42,212 b/d of oil limited by test equipment capacity.

Atrush-2, 3.1 km east of and downdip from the Atrush-1 discovery well, found the Jurassic Barsarin-Sargelu-Alan-Mus (BSAM) reservoir oil-down-to 97 m deeper than in the discovery well. Reservoir intervals in the Jurassic Adiyah and the upper part of the Butmah formation are also oil-bearing.

Separate cased-hole drillstem tests were conducted over three of the formations in the BSAM reservoir. Rates totaling 42,212 b/d of 27° gravity oil were achieved. No test had measurable amounts of formation water.

Separate tests were also conducted in the Butmah in open hole and Adaiyah in cased hole.

The highly fractured upper part of the Butmah flowed as much as 1,450 b/d of fluid on nitrogen lift and towards the end of the test was producing 100% 9° gravity oil. A reservoir zone in the Adaiyah anhydrite flowed as much as 650 b/d of 11° gravity dry oil.

In accordance with the requirement of the production sharing contract, GEP has presented a notice of discovery to the Ministry of Natural Resources of Kurdistan for the Adaiyah and Butmah.

GEP spudded AT-2 on May 23 and reached the planned total depth of 1,750 m in 49 days, on time and 30% under budget.

Meanwhile in the eastern part of the Atrush block, the second phase of seismic acquisition was completed in August 2012, providing GEP with 3D coverage of the entire block. Tender is under way for the lease of an extended well test facility with an award expected shortly. Plans are for a recompleted AT-1 to be connected to the EWTF and begin producing oil in early 2013.

GEP operates the Atrush block with an 80% working interest. Aspect Holdings LLC through its Aspect Energy International LLC subsidiary has a 66.5% interest, and ShaMaran Petroleum Corp. through its wholly owned subsidiary, ShaMaran Ventures BV, has a 33.5% interest in GEP. Marathon Oil KDV BV has 20% interest in the block.

[alan131210]

Azzaman, September 12, 2012

Iraq is considering the expulsion of U.S. oil firms refusing to suspend their activities in its Kurdish region, Deputy Prime Minister for Energy Affairs Hussein al-Shahristani has been reported as saying.

Local newspapers said Shahristani, who leads the current rise of the country as a major oil exporter and producer in the world, is unhappy with the persistence of U.S. oil majors not to annul their contracts with the Kurdish region.

He was reported as saying that the Americans were to choose between keeping their lucrative contracts with the central government in Baghdad or their deals to develop much smaller oil fields in the Kurdish north.

Shahristani is emerging as a national figure in Iraq due to his insistence that the development of the country’s national resources, namely oil, must be the sole responsibility of the federal government in Baghdad.

He has been the most vociferous Iraqi official to denounce the Kurds for striking oil deals with foreign firms without Baghdad consent.

Shahristani would also like all the proceeds from oil sales in Iraq, including those collected from the export of oil originating in the Kurdish region, be funneled to the Iraqi exchequer.

The Kurds have suspended shipping oil produced in their region via Iraqi pipelines for exports, denying the country of nearly 175,000 barrels a day, totaling more half a billion dollars a month.

Iraq’s oil exports are currently the highest in 30 years and running at an average of 2.56 million barrels a day.

The Kurds rely on the central government to finance their budget. They get 17% of the total oil revenues Iraq earns.

But Baghdad has threatened to trim billions of dollars from their budget due to their failure to heed its terms on oil development and exports.

[alan131210]

Two new early production systems (EPS) on the Shaikan field in the Kurdish region of northern Iraq will produce 30,000-40,000 b/d of export quality crude by the middle of next year, according to operator London-listed Gulf Keystone.

The first EPS will come on stream in January and the second by the end of the first quarter. The field has been producing several thousand barrels a day through an extended well test that began in November last year.

Gulf Keystone declared Shaikan commercial last month and said it will submit a field development plan by the end of January next year. It envisages production of 150,000 b/d by 2015 but has said the field is eventually capable of producing 400,000 b/d.

The company said it is awaiting confirmation of the route of the export pipeline to tie the field into export routes. This is dependent on “a number of important decisions by the Kurdish Regional Government regarding the overall regional pipeline outlook and further exports of crude from the region”, it added.

http://www.kurdsat.tv/news.php?id=944&type=kurdistan

[alan131210]

PNA - Hunt Oil Middle East has started exploration drilling at the East Simrit prospect in Iraqi Kurdistan, project partner Afren said.

UK-listed Afren said the Simrit-3 exploration well would explore the eastern extent of the large-scale Simrit anticline on the Ain Sifni production sharing contract.

Hunt operates the Ain Sifni PSC with a 60% interest while Afren holds a 20% stake. The Kurdistan regional government holds the remaining 20% interest.

Simrit-3 lies about 10 kilometres east of the Simrit-2 discovery well, which was drilled to a depth of 3800 metres in June and hit 460 metres of net oil pay throughout Cretaceous, Jurassic and Triassic age reservoirs.

In July, the first batch of three drill stem tests (out of 12 planned to be undertaken in total) in the Triassic age Kurra Chine formation had resulted in an aggregate flow rate of 13,584 barrels per day of light crude oil.

“The drilling and test results recorded to date have already confirmed Ain Sifni in the Kurdistan region of Iraq to be a world-class asset,” Afren chief executive Osman Shahenshah said in a statement.

“The Simrit-3 exploration well, which is part of ongoing evaluation of the block’s transformational potential, will test the areal extent of the existing discovery.”

http://www.peyamner.com/English/PNAnews.aspx?ID=288508

[alan131210]

Arbil September 13 / September (AKnews) - political source, said on Thursday that the federal government and the Kurdistan Regional Government agreed to pay dues to oil companies operating in the region, as must Kurdistan to increase its exports to 250 thousand barrels per day from next year.

The Kurdistan Regional Government announced yesterday a delegation from the region to Baghdad soon to discuss pay the federal government file financial receivables for foreign companies operating in the oil sector in Kurdistan.

A source in the Office of the Deputy Prime Minister Ruz Nuri Shawis told the Kurdish news agency (Rn) that "an agreement between a delegation from the Kurdistan region with the Federal Government represented by the Ministry of Oil to ensure payment of the federal government for financial dues to oil companies operating in the region."

He explained that "the agreement also included forcing the Kurdistan region to continue to export oil agreed in the text of the federal budget while working to increase it to 200 thousand barrels, should be increased to 250 barrels per day from next year."
The source added that "the meeting was held amid the Green Zone instead of the Federal Ministry of Oil."

And shall render the province in accordance with the text of the federal budget for the current year 175 thousand barrels per day compared to receiving 17% of the federal budget.

The Kurdistan region had earlier threatened to halt its share of national oil exports again on September 15 / September, in a dispute over payments with the federal government.

The region resumed pumping oil to the Iraqi government line that connects Kirkuk Turkish port of Ceyhan early last month after he was stopped in April / May last year.

He says the region that the Baghdad push $ 1.5 billion as receivables to companies producing oil fields of Kurdistan, while threatening the federal government cut off funds from the region's share in the general budget because of the failure of the latter to export its share of assessments of oil through the national exports, according to the government in Baghdad.

use Google translator
http://www.aknews.com/ar/aknews/4/326241/

[Rando]

things seem to be setteling between KRG and Baghdad.
do you guys think we will decleare independece in 2013? (when the pipeline is done,which means we can survive economaclly without baghdad)

[burnsss]

things seem to be setteling between KRG and Baghdad.
do you guys think we will decleare independece in 2013? (when the pipeline is done,which means we can survive economaclly without baghdad)

Do you trust someone who has the knife on your throat? These pipelines will put away the knife if Bagdad play games and threatens krg. if we declare independence it will be next year before tikriti acuire f16. Remember tikriti is creating new units like tigris command who will fall under his command. maliki is Iraq new dictator and only naive or stupid people can trust a person like that. this deal will give us time to develop the oilfield and prepare the oil infrastructure if we ever declare independence.

[alan131210]

there is literally no more point for kurdistan to be in the current status quo with iraq after the pipeline is completed and pumping oil, specially 1 million bpd !

then we will go to UN to settle the kurdish isolated areas which is in our hands anyway but unofficially.

we will go for a "UN Arbitration" to settle these areas, if it wasn't for pdk-puk internal challenges towards each other, in 2003 these areas would have been official part of KRG, that is another discussion which id rather not get into.