Deloitte Report on Kurdistan Region Oil and Gas

Deloitte report on Oil and Gas review in the Iraqi Kurdistan Region - Q1 to Q3 of 2020

The KRG's Regional Council of Oil and Gas Affairs has published a report containing verified statistics covering the Kurdistan Region's oil exports, consumption and revenues for period 1 January 2020 to 30 September 2020.

The report, available in Kurdish, English and Arabic, provides a quarterly analysis of oil export information and average prices.

The data verification was performed by Deloitte.

Transparency being central to the cabinet agenda, the KRG regularly assesses what additional disclosures would enhance the transparency of its oil and gas sector. Accordingly, from 2019 the KRG started providing information on the prepayment balances it owes to oil traders and in 2020 disclosures are further extended to include reconciliation between production and exports and local consumptions.

The Regional Council for Oil and Gas Affairs acknowledges the positive feedback received so far from domestic and international stakeholders. The council reiterates its commitment to the people of Kurdistan that Deloitte will continue to independently review the region's oil and gas sector.

A frequently asked questions handbook (also available in Kurdish, English and Arabic) will help readers to understand the report's contents.

Click here to download the reports.

(Source: KRG)

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GKP Shares Rise following Update

By John Lee.

Shares in Gulf Keystone Petroleum (GKP) closed the day up more than 5 percent on Wednesday, after the Kurdistan-focused oil producer provided an operational and corporate update to the markets.

Jón Ferrier, Gulf Keystone's Chief Executive Officer, said:

"I am pleased to report that throughout 2020, Gulf Keystone successfully managed the challenging operating environment delivering record annual average production of over 36,600 bopd and in December, record monthly average production of over 43,000 bopd.

"Planned debottlenecking works have increased PF-1 production capacity to more than 30,000 bopd and the Company expects to deliver average gross production in 2021 of 40,000 to 44,000 bopd. We look forward to updating guidance once conditions allow resumption of the 55,000 bopd expansion.

"I would like to thank the team at GKP for their dedication and professionalism in what has been a challenging year for the E&P sector. I look forward to working closely with my successor, Jon Harris, to effect a smooth handover of responsibilities and I am confident of the continuing success of the Company."

Operational

  • GKP's continued strong focus on safety resulted in no Lost Time Incidents during 2020.
  • The Company has effectively managed to minimise the impact of COVID-19 on our staff and contractors and ongoing production operations.
  • In 2020, average gross production at Shaikan was 36,625 bopd, exceeding the top end of the guidance range and the highest annual average production rate to date from the field.
  • The previously announced PF-1 plant debottlenecking work has delivered production capacity in excess of 30,000 bopd.
  • As a result, Shaikan Field production has increased and is currently c.44,000 bopd.

Financial

  • Total cash received from the Kurdistan Regional Government ("KRG") during 2020 for payments of crude oil sales was $129 million ($101 million net).
  • As a result of increased production and the recent improvement in the oil price, the December 2020 crude oil sales invoice submitted to the KRG was $18.0 million ($14.1 million net), up 65% from the previous month.
  • As at 12 January 2021, the Company had a cash balance of $147 million.

Corporate

  • Jon Harris to join as Chief Executive Officer and Board member on 18 January 2021.

Outlook

  • Guidance for 2021 is: 40,000 to 44,000 bopd average gross production, $15 to $20 million net Capex and $2.5 to $2.9/bbl Opex.
  • Guidance will be updated once conditions allow well workovers and/or the restart of the drilling programme to achieve 55,000 bopd.
  • Following receipt of the previously announced proposal to repay the arrears from the outstanding November 2019 to February 2020 invoices, totalling $73.3 million (net), the Company continues to engage with the KRG and will provide an update in due course.
  • The Company remains committed to maintaining its strong financial position and, as conditions continue to improve, will look to return to a balance of growth focussed field development investments and shareholder distributions.

(Sources: GKP, Yahoo!)

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ShaMaran achieves 40m Barrels Production at Atrush

ShaMaran Petroleum has announced that the January 2021 interest payment due on its 12% senior unsecured bonds due 2023 (ISIN: NO 001082645.6) has been timely made to all Bondholders.

In addition, ShaMaran said the Atrush field total cumulative crude oil production has exceeded 40 million barrels.

The Atrush field is located 85 km northwest of Erbil and is one of the largest new oil developments in the Kurdistan Region of Iraq.

The field was first discovered in 2011 and oil production started in July 2017. In its fourth year of production, the Atrush field has sold all its production to the Kurdistan Regional Government of Iraq at international market prices less a discount based on quality and transportation charges.

ShaMaran President and Chief Executive Officer Dr. Adel Chaouch said:

"Following a challenging 2020 for the oil industry in Kurdistan, ShaMaran is pleased to start off 2021 with the full and timely payment of the semi-annual interest owed to our Bondholders.

"Our achievement of this 40 million barrel production milestone also demonstrates the ability of Atrush field to maintain stable production even through the past difficult times.  We look forward to future achievements."

(Source: ShaMaran)

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KRG proposes new Minister of Natural Resources

By John Lee.

The Prime Minister of the Kurdistan Regional Government (KRG), Masrour Barzani, has nominated Dr. Kamal Atroshi to the post of Minister of Natural Resources, a position which includes responsibility for the oil and gas portfolio.

A statement from KRG spokesperson Dr. Jotiar Adil said, "It is our hope that the Kurdistan Parliament includes this topic in its next session and provides a vote of confidence".

According to his Linked-In profile, Dr al-Atroshi was educated in Iraq and France, and has worked extensively in the oil sector in Kuwait. He has held positions with the Kuwait Foreign Petroleum Exploration Company (KUFPEC), Gas & Oil Field Services Company (GOFSCO), and Total.

(Sources: Kurdistan Regional Government, Linked-In)

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Khor Mor Gas Plant reaches Record Production

Dana Gas has announced the production of sales gas from Pearl Petroleum's Khor Mor Gas Plant in the Kurdistan Region of Iraq (KRI) reached a new record level of 430MMscf/d on 15 December 2020.

Fourth quarter's average gas production as of 15 December 2020 is 400MMscf/d, an 8% increase on Q4 2019's average production of 370MMscf/d.

Pearl Petroleum has also restarted expansion plans in the KRI on the 15 December. This follows the suspension of work in March 2020 due to Covid-19 restrictions. All parties working on the project are fully committed to executing the expansion project as quickly and as safely as possible.

The Company expects to complete the first 250 MMscf/d gas processing train in Q1 2023 and is also examining ways to reduce the schedule further.

In line with the Kurdistan Regional Government (KRG) commitment to review the outstanding December 2019 to February 2020 invoices totalling $30 million, Dana Gas notes Pearl Petroleum's confirmation of receipt of a payment plan proposal from the KRG to pay down past receivables during 2021 as long as Brent remains above $50/bbl.

Pearl Petroleum continues to engage constructively with the KRG on this matter to ensure timely payment. The KRG has maintained regular monthly payments since March 2020.

Dr Patrick Allman-Ward, CEO of Dana Gas, commented:

"Our joint operations at Pearl Petroleum continue to set new records with production output whilst maintaining an excellent HSSE track record, validating our long-term strategy to concentrate on further developing our world-class fields in the KRI. We are getting tremendous support from the KRG, which has given us the green-light to restart the civil engineering works under strict health protocols and controls.

"This clears a major hurdle and puts us on a path for first gas from the new train in Q1 2023. I am also pleased to provide an update on our Q4 average gas production, which is 8% higher at 400MMscf/d than in the same period last year.

"In addition, our commitment and contribution to the people of the KRI remains as strong as ever. Our partnership is now in its 12th year. 2020 has been very challenging due to the restrictions imposed by the global pandemic but the team has worked tirelessly to keep our operations ongoing throughout the year, adhering to strict health and safety protocol to ensure the continuous flow of gas to power the KRI's electricity needs."

(Source: Dana Gas)

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KRG to Resume Override Payments to Genel

By John Lee.

Genel Energy has received notice from the Kurdistan Regional Government ('KRG') that override payments, whereby Genel receives 4.5% of monthly Tawke gross field revenues, will resume with the January 2021 invoice, to be paid in February 2021. Assuming the prevailing oil price, this translates into over $5 million of additional cash proceeds on a monthly basis.

This is consistent with the communication received from the KRG as announced on 17 April, which stated that the override payments would be suspended for at least nine months, and also that in a scenario where the oil price recovers to c.$50/bbl, a review of the situation would take place immediately in respect of the outstanding receivable.

In line with this communication, the KRG has now also submitted a reconciliation model for repayment of the receivable relating to amounts owed for invoices for oil sales from November 2019 to February 2020 and the suspended override from March to December 2020. We will work through this submission and update the market when appropriate, as further discussions with the KRG take place.

(Source: Genel Energy)

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Oryx Petroleum Changes Name, Plans $51m Capex

By John Lee.

Oryx Petroleum Corporation has announced that it has changed its name to Forza Petroleum Limited.

2021 Budgeted Capital Expenditures

Budgeted capital expenditures for 2021 are $51 million and dedicated exclusively to the Hawler license area.

The planned work program involves drilling five new wells into proven, producing reservoirs and reservoirs still being appraised in the Demir Dagh, Zey Gawra and Banan fields, completing a previously drilled well in the Ain al Safra field for further evaluation, and installing a gathering system to eliminate trucking in the western part of the Hawler license area to reduce environmental impact and operating expense.

Completion of the full budgeted program is dependent on available funding from one or a combination of increased revenue from oil sales resulting from higher than forecast Brent crude oil prices or production, settlement of past due receivables by the Ministry of Natural Resources of the Kurdistan Region of Iraq in respect of oil sales made between November 2019 and February 2020, and additional funding from third parties.

The Corporation is in discussions with its controlling shareholder regarding financing arrangements to fund budgeted capital expenditure to the extent internal capital is not available.

Operations Update

  • Average gross (100%) oil production of 11,100 bbl/d (participating interest 7,200 bbl/d) for November 2020
  • During November, leased artificial lift equipment used to produce the Banan-4 and Banan-3 wells was demobilized and replaced by a purchased pump in the Banan-4 well, reducing future operating expenditure related to producing the Banan field
  • The previously announced new well targeting the Tertiary reservoir in the Zey Gawra field is not expected to spud before January 2021 as the drilling rig intended for the project continues to be in use by another operator in the region and has not yet been released

CEO's Comment

Commenting today, Forza Petroleum's Chief Executive Officer, Vance Querio (pictured), stated:

"We are very encouraged by the rebounding crude oil market and plan to maintain an active program of drilling during 2021 to continue the progressive development of the Hawler license area in the Kurdistan Region of Iraq. We intend to increase our offtake rates from some of our proven, producing reservoirs and to continue evaluating the potential of other accumulations in the area that have not previously been produced.

"During a difficult year related to the global pandemic and other headwinds across the oil and gas industry, we have remained committed to maintaining safe operations and decreasing operating costs where possible. The installation of a gathering system to serve the western flank of the Hawler license area will support both of these objectives by dramatically reducing the potential of environmental impact and the relatively high cost of tanker transport operations in the area.

"We look forward to an improving operating environment in 2021 and to continuing our successful efforts to develop the resources of the Hawler area for the benefit of Forza Petroleum, the Kurdistan Regional Government, the employees of OP Hawler Kurdistan Limited and the citizens of the communities in which we operate."

(Source: Oryx)

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Gazprom Neft developing Fourth Well at Sarqala

By John Lee.

Russia's Gazprom Neft has produced its four-millionth tonne (32-millionth barrel) of oil since starting commercial development of the Sarqala field in the Kurdistan Region of Iraq (KRI).

Three wells are now in operation at this field, with daily production running at about 3,100 tonnes (24,000 barrels) per day.

Limitations arising under the COVID-19 pandemic notwithstanding, Gazprom Neft Middle East B.V. is continuing to develop this field and is implementing a number of key production projects, including drilling a fourth well, the commissioning of which will increase production to 4,100 (around 32,000 barrels) per day. The commissioning of this well is scheduled for the first half of 2021.

Gazprom Neft Middle East B.V. is involved in this project with the Government of the KRI as part of the latter's development of the region's energy supply system. Associated petroleum gas (APG) produced at the Sarqala field will be used as fuel for energy facilities currently under development by government authorities.

This programme envisages the construction of a 4.5-kilometre gas pipeline to connect the field to power generation facilities. Implementing this project will not only increase APG utilisation at the field, but will also facilitate energy supplies to several districts within the KRI.

(Source: Gazprom Neft)

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Total “in Talks” to Sell Stake in Iraqi Oil Field

By John Lee.

France's Total is reported to be in talks to sell its 18-percent stake in the Sarsang block in Iraqi Kurdistan, in a move aimed at reducing the company's debt.

Bloomberg says the company is working with Jefferies Financial Group on the deal, adding that the holding could be worth as much as $500 million.

More here and here.

(Source: Bloomberg)

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Liftings underway at Sarta

By John Lee.

Genel Energy has announced that, following first oil production last week, first liftings have taken place from the Sarta field (Genel 30% working interest).

According to a statement from the company, the Sarta-3 well is producing at an initial rate of over 5,000 bopd, with an API gravity of c.27 degrees, in line with expectations at this stage.

Tanker loadings are now underway, with oil being transported to Khurmala for offloading into the export pipeline.

(Source: Genel Energy)

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