Two wholly-owned subsidiaries of Talisman Energy entered into agreements with the Kurdistan Regional Government (KRG) within Iraq for interests in Blocks K44 and K39 respectively, effective upon completion of certain conditions, which Talisman expects will be satisfied within 60 days.
"This is an exciting opportunity in a world class hydrocarbon basin," said John A. Manzoni, President and Chief Executive Officer. "It is a great fit in terms of Talisman's global expertise and the strategic objectives of our exploration program, with the potential to become a core producing area for us.
"We have done extensive due diligence, including careful review of legal, regulatory, security and corporate responsibility issues. Block K44 is an established Production Sharing Contract (PSC) area, entered into by the KRG prior to the effective date of the new Iraqi constitution. The block is in the early stages of exploration with a well currently drilling. Both blocks are within the territory widely recognized as being on the KRG side of the 'Green Line' boundary that currently demarcates the region of Kurdistan within Iraq."
Talisman will acquire a 40% interest in Block K44, with WesternZagros Limited (a wholly owned subsidiary of WesternZagros Resources Ltd.) holding 40% as operator and the KRG retaining 20%. Talisman plans to spend US$80 million on the block, including past costs and a three well commitment.
Talisman has also entered into a seismic services agreement with the KRG on Block K39 for a period of two years, following which Talisman will have the option to enter into a PSC as operator of the block with a 60% working interest and a one well commitment in the first year. Talisman estimates exploration costs associated with the initial work program on this block to be US$10-15 million.
As part of the transactions with the KRG and in keeping with Talisman's corporate responsibility policies and practices, the company will pay US$220 million plus further conditional contributions to the KRG for the sole purpose of providing financial support to infrastructure and capacity building projects for the benefit of the people in the region and, in particular, the local communities in the agreement areas. The KRG is bound to adhere to the principles of the Extractive Industry Transparency Initiative (EITI) pursuant to the Kurdistan Regional Oil and Gas Law. Talisman and the KRG have confirmed their mutual commitment to revenue transparency in the spirit of the EITI, as well as to promoting respect for and compliance with human rights principles, including those set forth in the Voluntary Principles on Security and Human Rights.