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GKP Maintains Production Guidance; Shares Up

Shares in Gulf Keystone Petroleum (GKP) were trading up 3 percent on Monday after the company provided an operational and corporate update on its operations in Iraqi Kurdistan.

Analyst Peel Hunt has reportedly re-issued its “Buy” rating during the morning.

Operational

  • Operational activity continues at the Shaikan Field (pictured) to complete the debottlenecking programme in 2019, in order to achieve the near-term production target of 55,000 bopd in Q1 2020
  • Progress is continuing with the export pipeline from PF-1 to the main export pipeline, which remains on schedule to become operational mid-year, at which point trucking of crude oil will be eliminated
  • The SH-1 workover to replace the existing tubing with larger bore tubing, has now been successfully concluded.  The result was positive with an increase in production from the well of approximately 50% to over 6,500 bopd
  • The IOT Rig 1 has been demobilised.  It will now complete a short workover for another operator nearby before returning to Shaikan for the remaining workovers in the 55,000 bopd expansion programme.  This will include the SH-3 tubing change-out, along with installation of Electric Submersible Pumps (“ESPs”) in wells SH-5, SH-10 and SH-11
  • DQE’s Rig 40 is currently being prepared ahead of the imminent Jurassic drilling campaign, which remains on schedule to be mobilised for the SH-H well later this month

Corporate

  • A renewal of the crude oil sales agreement has been signed between Gulf Keystone Petroleum International Ltd and the Kurdistan Regional Government (“KRG”)
    • The KRG will purchase Shaikan crude oil directly injected at PF-2 into the Atrush export pipeline at the monthly average Dated Brent oil price minus a total discount of c.$21 per barrel for crude
    • Until the PF-1 pipeline is completed, the KRG will continue to purchase crude oil delivered by truck at a discount of c.$22 per barrel
    • The above discounts account for quality, domestic and international transportation costs
    • The agreement is effective from 1 January 2019 until 31 December 2020
  • The Company has received final clearance from Sonatrach in relation to the Ferkane Permit (Block 126). This officially marks Gulf Keystone’s exit from its Algerian operations.
    • This positive development will allow the Company to release $10 million of past liabilities

Outlook

Despite Q1 production having been affected by SH-1 being offline for the workover, and the export system being shut-down for maintenance for a week earlier this month, the Company maintains its 2019 gross average production guidance in the range of 32,000 – 38,000 bopd

 (Sources: GKP, Yahoo!, Financial Headlines)

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$700m Investment in Kurdistan Gas Project

Pearl Petroleum Company Limited, the consortium led by Crescent Petroleum and Dana Gas of the UAE, has signed a new 20-year Gas Sales Agreement (GSA) with the Kurdistan Regional Government (KRG) to enable production and sales of an additional 250 MMscf/day that the consortium aims to produce by 2021 as part of their expansion plans in the Kurdistan Region of Iraq (KRI) in order to boost much needed local domestic electricity generation.

Pursuant to the Settlement Agreement reached between the parties in August 2017, this new gas sales agreement was signed on 19th February 2019 by Dr. Ashti Hawrami, Minister of Natural Resources on behalf of the Kurdistan Regional Government, and Mr. Majid Jafar, CEO of Crescent Petroleum and Board Managing Director of Dana Gas, on behalf of Pearl Petroleum.

All approvals for the agreement, including by the the Kurdistan Region Council for Oil & Gas Affairs and the Board of Pearl Petroleum, have since been granted, with  project work now under implementation.

The Kurdistan Gas Project was established in 2007 as Dana Gas and Crescent Petroleum entered into agreement with the Kurdistan Regional Government (KRG) for certain exclusive rights to appraise, develop, produce, market, and sell petroleum from the Khor Mor and Chemchemal fields in the Kurdistan Region of Iraq (KRI).

Production from the newly built plant in Khor Mor began just 15 months later, in October 2008. In 2009, Pearl Petroleum was formed as a consortium with Dana Gas and Crescent Petroleum as shareholders, and with OMV, MOL, and RWE joining the consortium subsequently with a 10% share each.

The $700 million expansion underway at the Khor Mor plant will include the addition of two new production trains at the Khor Mor plant, as well as drilling of new wells with plans to raise production from the current 400 MMscf/day to reach 650 MMscf/day by 2021 based on this latest GSA, and then to 900 MMscf/day beyond that by 2022.

This follows the 30% production increase from debottlenecking throughput at the Khor Mor plant, which brought current total production to 106,000 barrels of oil equivalent per day (boepd), making it the largest regional private sector upstream gas operation in Iraq today.

Gas sales commenced late in 2018 under a gas sales agreement signed in January of that year, and all payments have been received in a timely manner in full, which gives confidence for the investment and expansion plans currently underway by the Consortium. The Kurdistan Gas Project, which recently commemorated 10 years of continuous production, supplies natural gas from the Khor Mor field by pipeline to power plants in Bazian, Chemchemal and Erbil, as well as LPG and condensate, which are sold in the local markets.

In August 2017, Pearl Petroleum reached a full and final settlement with the KRG of the arbitration between them, including settlement of past receivables and committing to expand their investment and operations in the region. These expansion plans include the multi-well drilling program currently underway in both the Khor Mor & Chemchemal fields, as well as installation of additional gas processing and liquids extraction facilities. The fields are operated jointly by Crescent Petroleum and Dana Gas on behalf of Pearl Petroleum.

Total investment in the Kurdistan Gas Project to date exceeds $1.6 billion, with total cumulative production of over 260 million barrels of oil equivalent (boe), delivering billions of dollars in fuel cost savings and wider economic benefits for the Kurdistan Region and Iraq as a whole. That impact will continue to grow as production capacity expands in the coming years.

Dr. Ashti Hawrami, Minister of Natural Resources of the Kurdistan Regional Government (KRG) said:

“This agreement is an important step for us as we deliver improved services to the people of the Kurdistan Region of Iraq through enhanced electricity generation from the increase in gas production by the Consortium. The Kurdistan Region holds significant reserves of gas and the KRG is committed to playing a positive role in the growing gas and electricity needs of Iraq and the region.”

Mr. Majid Jafar, CEO of Crescent Petroleum and Board Managing Director of Dana Gas, commented:

“This gas sales agreement opens a new chapter in the expansion of the Kurdistan Gas Project that will see a further investment of over $700 million in coming years to expand production up to 900 MMscf/day, further fueling the Region’s economic growth and development. We look forward to developing the significant resources from these important fields, for the benefit of the Kurdistan Region and all of Iraq.”

Dr. Patrick Allman-Ward, CEO of Dana Gas, added:

“Dana Gas and our partners in Pearl Petroleum are particularly proud to be investing further in the gas sector of the Kurdistan Region of Iraq, delivering a reliable source of cleaner energy, and supporting local economic development.  The continuing receipt of payments in a timely manner gives confidence for our continued investment commitment as we enter our second decade of production.”

As part of its work in the KRI, Pearl has implemented a corporate social responsibility program to support local communities, including providing school supplies, drinking water treatment, generators and fuel enabling 24-hour electricity for local villages, mobile medical units, and youth sports facilities, as well as financial support for 1,000 orphans from the Chemchemal area in partnership with a local charity Foundation.

These initiatives are assisting the local communities in improving their standard of living, health, well-being, security and stability and the development of human capital.

(Source: Dana Gas)

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Shell “Still Evaluating” Viability of Nebras Petrochemicals Complex

By John Lee.

Shell is reported to be still in the process of evaluating the viability of the $11-billion Nebras petrochemical complex in Basra.

The project was designed to produce 1.8 million mt/year of various petrochemicals, using naphtha as a feedstock.

Last year, Reuters reported that Saudi Basic Industries Corp (SABIC) was in talks to join the project, but according to S&P Global Platts there has been no update on the progress of these talks.

(Source: S&P Global Platts)

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Intertek opens Iraq’s first Independent Hydrocarbon Lab

Intertek, the UK-based assurance, inspection, product testing and certification company, has announced the launch of the first independent crude oil, fuel testing and petroleum products laboratory in Iraq.

The new hydrocarbon laboratory, located in the port of Khor Al Zubair, will support the increased demand for quality assurance solutions in the petroleum industry across Iraq and will soon be offering octane engine fuel testing of gasoline for the first time in the country.

The launch of the 1,300 square feet laboratory allows Intertek to offer its services in this fast-growing market and in this highly strategic location. Khor Al Zubair incorporates industrial areas that are home to several petrochemical and other companies that will benefit from the proximity of the laboratory services to their operations. The nine jetties in the port of Khor Al Zubair are vital for fuel imports and exports in Iraq and enable direct access for crude carriers, refiners, distributors and trade companies.

Based within SKA Energy’s new oil storage terminal, the laboratory represents a significant investment in the Iraq oil and gas industry. Offering a wide range of services for the petroleum and related industries, the laboratory will deliver sample testing, and services for the downstream oil and gas and aviation sectors.

It will also provide detailed crude oil, naphtha and gasoline quality analysis and testing, which helps clients maintain or improve fuel quality to meet commercial and regulatory specifications. The facility will offer 24/7 operations and trouble-shooting support.

Matthew Skinner, Intertek Regional Managing Director Gulf and Pakistan, said:

“As the demand for Assurance services in Iraq grows, we are delighted to have achieved an industry first in opening this laboratory.

“Our new facility in Khor Al Zubair allows us to cater for the needs of numerous parties operating within the oil and gas industry in Iraq, providing our customers with systemic Total Quality Assurance Solutions. Local companies can now obtain lab reports to help them assess their fuels in accordance with industry international standards, at a shorter turnaround time.”

(Source: Intertek)

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Oil Minister meets Turkish Firm to discuss Projects

By John Lee.

Oil Minister Thamer Al-Ghadhban met on Tuesday with Nhat Ozdemir, Chairman of the Board of Directors of Turkish conglomerate Limak.

The minister said he was keen to develop the energy sector through cooperation with international companies, noting the presence of promising opportunities in Iraq.

Mr Ozdemir said his company wants to cooperate with the Ministry of Oil in the development of the energy sector in the country.

(Source: Ministry of Oil)

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AMAR’s Women Work Wonders

By Kate Denereaz, for the AMAR International Charitable Foundation.

Work is a huge part of our lives. It provides security, meaning and a sense of belonging. It’s part of who we are.

Many AMAR staff, like the people they serve, have been displaced by war and violence. Working for AMAR provides structure and a semblance of normality.

But work means many different things to different people. To mark International Women’s Day, we’re asking some of the women of our workforce, “what does working for AMAR mean to you?”

Click here to hear their stories.

(Source: AMAR)

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Japan donates $3.4m for Children in Iraq

The government of Japan has donated US$3.4 million to provide lifesaving health and nutrition assistance for vulnerable children in conflict affected areas in Iraq.

Approximately 4.2 million people have returned to their homes after fleeing the violence that erupted in 2014, however many find their homes and communities have been reduced to rubbles and essential health services overstretched.

“Across all conflict affected governorates, hospitals have been destroyed and those that are functioning are overwhelmed and struggling to meet health and nutrition needs, placing the lives of the most vulnerable children at risk of deadly diseases, including polio and measles,” said Peter Hawkins, UNICEF Representative to Iraq.

“Japan has recently decided on a new assistance package for Iraq amounting to 63 million US dollars, including this project as contribution in health and nutrition sectors. With this package, the total amount of Japan’s assistance to the people affected by the crisis in Iraq reaches 500 million US Dollars,” said H.E. Mr. Naofumi Hashimoto, Ambassador of Japan to the Republic of Iraq said.

UNICEF is grateful to the Government of Japan in their unwavering support to vulnerable children and families in Iraq. Since 2015 UNICEF Iraq has partnered with Government of Japan to support the needs of children caught in cycles of violence.

The latest funding of US$.3.4 million will compliment Japan and UNICEF’s investment for Iraqi children by building the capacity of health workers, strengthening health systems in conflict affected governorates as well as providing immunization and nutrition services to nearly 1 million children and breastfeeding mothers in areas of returns as well as in the camps for displaced people.

(Source: UN)

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Iraq Oil Exports Down Slightly in February

By John Lee.

Iraq’s Ministry of Oil has announced interim oil exports for February of 101,387,615 barrels, giving an average for the month of 3.621 million barrels per day (bpd), down from the 3.649 bpd exported in January.

These exports from the oilfields in central and southern Iraq amounted to 99,120,006 barrels, while exports from Kirkuk amounted to 1,753,373 barrels, and from Qayara 514,236 barrels.

Revenues for the month were $6.168 billion at an average price of $60.834 per barrel.

January export figures can be found here.

(Source: Ministry of Oil)

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Iran’s President to Visit Iraq in March

Iranian President Hassan Rouhani will travel to Iraq on March 11 for an official visit.

Heading a high-ranking delegation, the Iranian president will be visiting the Arab country at the official invitation of Baghdad.

It will be Rouhani’s first official visit to Iraq during his tenure.

On Monday, Iranian Deputy Foreign Minister Abbas Araqchi met with Prime Minister of Iraq Adil Abdul-Mahdi in Baghdad to make arrangements for Rouhani’s forthcoming trip.

The Iranian president’s visit would come against the backdrop of Tehran’s efforts to boost its foreign trade in the US sanctions era.

Iraq’s foreign minister said recently that his country is “not obliged” to abide by sanctions imposed by the US against Iran and would be pursuing options to continue bilateral trade.

President of Iraq Barham Salih paid a visit to Tehran in November 2018 with a ranking delegation for a series of political and economic talks.

Speaking at a joint press conference with his Iraqi counterpart at that time, Rouhani said the value of trade and economic interaction between Tehran and Baghdad stood at around $12 billion, adding that the two neighbors have the potential for a $20-billion trade target.

Earlier this month, governors of the central banks of Iran and Iraq signed an agreement to develop a payment mechanism aimed at facilitating banking ties between the two neighboring countries.

According to governor of the Central Bank of Iran Abdolnaser Hemmati, Iran is going to open euro and dinar-based accounts to process transactions for trade in oil and gas.

Describing Iraq as Iran’s major partner, Hemmati said the two countries have agreed to make the banking ties much stronger.

He also stated that Iraqi companies can reciprocally open accounts in Iranian banks and conduct transactions in dinar.

In December 2018, Chairman of Iran-Iraq Chamber of Commerce Yahya Ale-Eshaq said the central banks of Iran and Iraq were finalizing negotiations to begin trade in their own currencies.

Iraq’s Foreign Minister Mohamed Ali Alhakim has made it clear that his country cannot cut off trade ties with Iran under the US sanctions.

(Source: Tasnim, under Creative Commons licence)

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Genel Energy completes Acquisition of Chevron Fields

By John Lee.

Genel Energy has announced that approval has been given by the Kurdistan Regional Government (KRG) regarding the acquisition of stakes from Chevron in the Sarta and Qara Dagh (pictured) blocks, in the Kurdistan Region of Iraq.

According to a statement from the company, the acquisitions have now closed and Genel therefore has 30% equity in the Sarta PSC, with Chevron holding 50% and the KRG the remaining 20%. Final investment decision relating to Sarta phase 1A development has now been taken.

Phase 1A begins with two wells, recompleting the Sarta-2 well and placing the Sarta-3 well on production, both of which flowed approximately 7,500 bopd on test, and the construction of a central processing facility with a 20,000 bopd capacity. Another well is expected to follow within twelve months of first oil, and further production capacity will be added as the field is developed and production ramps up. First oil is expected in 2020, with a total cost to Genel estimated at $60 million to the end of 2020.

Genel has booked an initial 10 MMbbls of net 2P reserves relating solely to this preliminary phase of the project. Unrisked gross mid case resources relating to the Mus-Adaiyah reservoir only are estimated by Genel at c.150 MMbbls, with overall unrisked gross P50 resources currently estimated by the Company at c.500 MMbbls.

Genel now holds 40% equity in the Qara Dagh PSC and is the operator, with Chevron holding 40% and the KRG the remaining 20%. Work is underway on assessing the optimal location for the Qara Dagh-2 well, which is set to be drilled in 2020. Unrisked gross mean resources at Qara Dagh are currently estimated by Genel at c.200 MMbbls.

Shares in Genel Energy have risen 9 percent over the past 24 hours.

(Sources: Genel Energy, Yahoo!)