Kurdistan spearheads Iraq oil investment

The Spokesman
Kurdistan Regional Government

2 October 2007
Erbil, Kurdistan Region, Iraq

The Kurdistan Regional Government (KRG) Ministry for Natural Resources today announced that the KRG Regional Oil and Gas Council has approved four new production sharing contracts (PSCs) and sanctioned two new refinery projects in the Kurdistan Region in Iraq. The announcement came a day after the Council unanimously decided to award the contracts at its second formal meeting.

Dr Ashti Hawrami, the KRG Minister for Natural Resoures, said, “The projects will spearhead international investment for the whole of Iraq”. He added, “The first step was the KRG Oil and Gas Law in August, also approved unanimously by Kurdistan’s legislature. Pursuant to the Iraq Constitution, the KRG Law is the supreme law governing oil and gas activities in the Region. Now, these contracts with reputable and experienced oil companies. New oil discoveries under these contracts will bring large amounts of new revenues for sharing throughout Iraq, and locally refined petroleum products will help the people of the Kurdistan Region and the whole of Iraq, who now suffer from costly black market imports. It will spell the beginning of the end of the wasteful fuel subsidies of the federal government, and the corruption and crime that goes with them.”

Dr Hawrami said, “Next, we must see the draft federal Oil and Gas Law and the draft federal Revenue Sharing Law passed in the agreed form and consistent with the Iraqi Constitution. These will provide a proper platform for investment established in southern and central Iraq. If we use the federal Constitution as our guide, we will avoid the costly mistakes that were made in Iraq’s past and get projects going not just in the Kurdistan Region, but throughout our country.”

The combined initial exploration investments on the upstream projects will be approximately US$500 million. Estimated investment on the two new refinery projects will be around $300 million.

New upstream projects
The Ministry for Natural Resources today executed two of the approved production sharing contracts (PSCs) for oil and gas exploration and development in the Kurdistan Region:

Award of the Miran Block (1,015 square kilometres) in Suleimaniah Governorate to Heritage Energy Middle East Limited, a wholly owned subsidiary of Canadian listed oil company Heritage Oil and Gas. The Miran Block is a low to medium exploration risk area.

Award of the Sindi/Amedi Block (2,358 square kilometres) along the Iraq/Turkish border to Perenco Kurdistan Limited, a wholly owned subsidiary of Perenco S.A., the privately held French oil exploration and production company. The Sindi/Amedi Block is a high exploration risk area.

The signing of the other two PSCs with experienced international companies will follow shortly.

If commercial discoveries are made, these two PSCs will provide an estimated aggregate return/profit of over 85% to Iraq and around 15% to the contractors.

The commercial terms of these contracts conform to the term guidelines published by the KRG on its website on 29 June and provide similar returns to Iraq. The contract signed with Hunt Oil in August this year was also within these terms. The existing KRG contracts, signed prior to Kurdistan Region Oil and Gas Law, will also, where necessary, be brought into conformity with the guidelines, and as required by that Law.

The details of commercial terms of all contracts will soon be published by the KRG as required by the Law. All contracts issued by the KRG are in the form of the Model PSC, also published on 29 June.

Under the four PSCs, the KRG has the right to up to 25% participation interest, and it has retained the right to assign up to another 25% to qualified Iraqi and international companies to further stimulate the local economy.

Downstream projects

Miran area Refinery: Heritage has also agreed to fully fund (on a joint-venture basis) the completion of a new 20,000 barrels per day refinery in the Taq Taq / Miran area, to be completed within two years.

Taq Taq Refinery: The KRG’s Regional Oil and Gas Council has also approved a project for a refinery to be fully funded, commissioned and constructed by the Taq Taq field oil project operators (Genel/Addax) and other local and international investors. The refinery will also be expected to produce another 20,000 barrels per day. This refinery will be completed within eighteen months.

Revenue sharing, transparency
The government share of all revenues generated from the Kurdistan Region PSCs shall be for the benefit of all the Iraqi people. The products from the new refineries shall be available to the people of the Kurdistan Region and all of Iraq.

The KRG is in continuing negotiations with a number of international oil companies, downstream operators and local companies for further upstream and downstream projects.

“The KRG has established a transparent, attractive and competitive petroleum sector,” said Dr Hawrami. “We are open for business, and working hard to implement a broad range of projects that will be Iraq’s best hope for recovery and prosperity.”

Industry and media inquiries: spokesman(at)krg.org