Niko Signs First Production Sharing Contract in Kurdistan

Source: www.gulfoilandgas.com 5/20/2008, Location: Middle East

Niko Resources announced that as operator for a consortium, it has entered into its first Production Sharing Contract ("PSC") with the Kurdistan Regional Government for the exploration, development and production of petroleum resources in the 846 square kilometre Qara Dagh Block in Sulaymaniyah governorate of the Federal Region of Kurdistan - Iraq.

One of the members of the consortium has been in advance negotiations with the KRG over the past 8 months. Forming an acceptable consortium, with a qualified operator was one of the terms to be finalized.

The PSC provides that Niko will operate and have a 27% participating interest. The Block lies on trend with existing discoveries, a portion of which covers a large unexplored 65 kilometer long by 6 kilometer wide surface structure with existing oil seeps. Of interest Qara Dagh translates to Black Mountain.

The consortium has a 60% participating interest that is not subject to further dilution by the KRG. The Government will have a direct 20% interest and will be carried exclusively by the consortium. The remaining 20% will be assigned by the Government to a third party or parties, within a period of 8 months, with the requirement to pay back their share of costs incurred by the consortium.

The obligations under the PSC include a onetime signature bonus and capacity building bonus paid to the Government within 30 days from the execution date of the contract. Annual contributions to personnel, training and technological funds established by the Government, as well as community support contributions to be paid over a period of 15 months to assist with infrastructure projects in the area. The consortium will also be responsible for paying its proportionate share of certain production bonuses in the case of commercial discovery. The remaining minimum work program obligations represents an exploration commitment, expected to commence in the near future, which includes the acquisition, processing and interpretation of a minimum of 300 kilometers of 2D seismic data and drilling of one well during the first exploration period.

Edward Sampson - CEO and Bill Hornaday, COO, were both in Erbil for the signing and stated, "Niko is excited about the potential for the Block and is planning to commence operations immediately."


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