x Abu Dhabi, UAESunday 23 July 2017

Junior explorer strikes oil in Kurdistan

Region Gulf Keystone Petroleum is the latest oil-patch minnow to have struck oil in Iraqi Kurdistan.

Gulf Keystone Petroleum, a Bermuda-registered company listed on the London Stock Exchange, is the latest oil patch minnow to have struck oil in Iraqi Kurdistan. The oil junior, which in 2007 was a takeover target for the UAE's RAK Petroleum, yesterday announced a "significant" discovery with its very first well in the region. Based on preliminary data, it estimated the size of the discovery at between 300 million and 500 million barrels of oil in the ground. That is by no means huge by Iraqi standards, but it is another indication of the country's potential as a source of substantial new oil and natural gas reserves that are relatively easy to produce. Underexplored parts of the country such as Kurdistan, the semiautonomous northeastern region of Iraq, are especially rich in prospects. Gulf Keystone's oil strike is at a moderate depth of about 1,500 metres. The company's Shaikan-1 exploration well, located near the city of Dohuk, produced between 5,000 and 8,000 barrels per day (bpd) of crude during tests. The oil quality is comparable to that of crude pumped from the Tawke oilfield, north-west of the Shaikan block, the company said. Tawke's oil is being exported by pipeline through Turkey. The field is being developed by Norway's DNO International and Genel Enerji, the Turkish oil producer that is due to merge with Heritage Oil, a Canadian oil junior. Heritage recently discovered an oilfield in Kurdistan containing up to 3 billion barrels of recoverable oil. None of those enterprises approaches the stature of the major oil companies that last month bid on service contracts to raise production from some of Iraq's biggest oilfields. Two of them - Gulf Keystone and Heritage - produce very little oil and are not yet profiting from crude sales. Gulf Keystone, which describes itself as an "investment stage company", lost US$59.3 million (Dh217.8 m) last year. But Kurdistan is one of only a few jurisdictions believed to hold large untapped oil resources that encourages juniors to come and explore. And for a chance at a company-making discovery, a school of intrepid minnows have braved the immense political and legal uncertainties associated with operating in the region. BlackGold, a private Dubai company, said yesterday it had teamed up with DNO to explore for oil and gas near Erbil, the Kurdish regional capital. The company, a unit of the family-owned Dubai conglomerate Al Zarooni Enterprises, said it had also struck a deal with the Kurds over two newly leased exploration blocks. The exploration venture in Kurdistan may be BlackGold's first in the upstream oil sector. In a statement, it listed its main existing assets as an oil refinery and minerals operations in Ethiopia and South Africa. Kurdistan's regional government is locked in a war of wills with Baghdad over territory, resources jurisdiction and revenue sharing. The dispute has held up passage of a new federal oil law that is considered crucial for providing a legal foundation for any contracts held by foreign oil companies operating in Iraq. The Iraqi oil minister, Dr Hussain al Shahristani, has declared "illegal" more than two dozen deals that the Kurds have signed with foreign oil companies. Nonetheless, two months ago, the ministry allowed oil exports to start from the Kurdish region's Tawke and Taq Taq oilfields. The Iraqi government oil marketing agency is collecting the revenues, and there is still no agreement on how the foreign companies pumping the oil will get paid. Gulf Keystone was founded in 2001 by a group of Gulf investors and former state oil company managers to pursue oil production opportunities in Algeria. It switched its focus to Kurdistan in 2007, shortly after the proposed merger with RAK Petroleum fell through. That deal foundered when Algeria's government demanded a $10m payment to authorise the takeover. The Iraqi government's recent oil and gas licensing round, the first in post-war Iraq, attracted bids from the worlds biggest international oil companies and some national oil companies. But only one of the eight offered contracts was awarded, after most of the bidders baulked at the government's payment terms. Iraq's oil exports of 2 million bpd last month have now reached their highest level since the US-led invasion of the country in 2003, but are still below their pre-war peak of 2.4 million bpd. tcarlisle@thenational.ae