Following the unanimous decisions of the Regional Oil and Gas Council (“the Council”) of the Kurdistan Regional Government (KRG) at its second and third meetings, Dr Ashti Hawrami, the KRG Minister for Natural Resources, announced that the five production sharing contracts (PSCs) previously approved by the Council have been signed by the KRG with TNK-BP affiliate Norbest Limited, with a Korean consortium headed by Korean state-owned oil company KNOC, with Hillwood International Energy company HKN Energy, and with subsidiaries of UK-listed Sterling Energy LLC and Denver-based Aspect Energy LLC.
“These five PSCs are yet another clear expression of confidence in the strength and stability of the Kurdistan Region,” said Dr Hawrami, “and they produce very comprehensive returns for the people of Iraq.” The Council had approved these contracts at its earlier meetings, with today’s announcement following formal signing ceremonies in Erbil, the capital of the Kurdistan Region, on 10 November and 12 November.
The Prime Minister of the Kurdistan Region, Nechirvan Barzani, executed the five new PSCs on behalf of the Council, together with Minister Hawrami.
- Award of one PSC for four blocks comprising the Hawler Contract Area (of 1,532 square kilometres) in Erbil Governorate, to Norbest Limited, an affiliate of TNK-BP. The Hawler Area comprises blocks advertised in June as K11, K12, K14, K15, and is considered to be a low to medium exploration risk area.
- Award of the Bazian Block (473 square kilometres) in Sulaimani Governorate to KNOC Bazian Limited, owned by the Korea National Oil Corporation, and Korean private sector oil exploration and development companies SK Energy Co Ltd, Daesung Industrial Co, Ltd, Samchully Co Ltd, Bum-Ah Resource Development Corp, UI Energy Corporation, GS Holdings Corp, and Majuko Corporation. The Bazian Block is a relatively low exploration risk area.
- Award of the Sarsang Block (1,226 square kilometres) in Dohuk Governorate to HKN Energy Ltd, a Hillwood International Energy company. The Sarsang Block is considered to be a medium exploration risk area.
- Award of the Sangaw North Block (492 square kilometres) in Sulaimani Governorate to Sterling Energy (International) Limited, a wholly-owned subsidiary of Sterling Energy LLC. The Sangaw North Block is considered to be a low exploration risk area.
- Award of the Atrush Block (269 square kilometres) in Dohuk Governorate to General Exploration Partners Inc, a wholly-owned subsidiary of Aspect Energy LLC. The Atrush Block is considered to be a low exploration risk area.
If commercial discoveries are made, these five 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 6 November and provide similar returns to Iraq. All contracts issued by the KRG are in the form of the Model PSC, also published on 29 June and updated recently after the passage of the Regional Law. Under the five PSCs, the KRG has the right to a participation interest to further increase Iraq’s profit share and has retained the right to assign third party participation interests to qualified Iraqi and international companies to further stimulate the local economy.
Updated map and commercial guidelines
A map of the Kurdistan Region contract areas that remain open for negotiation, further updated from the map published on 6 November, can be downloaded here. Remaining blocks will, as always, be awarded to the companies which meet the financial and technical qualification criteria established by the Kurdistan Region Oil and Gas Law and offer the people of Iraq the best commercial terms.
Kurdistan Region in the lead
After the signing ceremony today, Dr Hawrami said: “In Kurdistan, we are setting an example: this is the first post-Saddam framework for oil investment in Iraq which follows the democratic, federal, and free market principles mandated by the Iraq Constitution. It is the first and the only constitutionally based legal framework to attract investments to Iraq, which is designed for Iraq-wide revenue sharing, an essential element of future stability in Iraq that the Constitution also rightly mandates.” “The KRG’s ambition now is for a similar constitutional framework to be adopted in the rest of Iraq. Without such a framework, investors cannot have confidence in contracts issued by authorities in other parts of Iraq,” he added.