Deloitte report on Oil and Gas review in the Iraqi Kurdistan Region – Q1 and Q2 of 2021
The KRG has published the reports containing verified statistics covering the Kurdistan Region’s oil exports, consumption and revenues for covering period 1 January 2021 to 30 June 2021.
During the first half of 2021, the KRG exported 77.35 million barrels through Kurdistan Export Pipeline. In addition, 3.95 million barrels were allocated to local refineries. Of the exported crude oil, 76.869 million barrels were lifted by the buyers from Ceyhan Export Terminal, at an average price of 53.446 $/bbl.
The KRG has generated revenues of USD 4.1 billion from crude oil export sales during the first half of 2021. After making payments to oil producers, pipeline operators, and repayments to the buyers, the KRG retained net revenues from crude oil sales of US$ 1.737 billion.
The KRG is has engaged in discussions with international buyers and oil producers in continuing its efforts to maximize sales prices and reduce production costs to maximize value for the people of Kurdistan.
Transparency is central to the cabinet’s agenda. The report, available in Kurdish, English and Arabic, provides a quarterly analysis of oil export information and average prices which have been independently reviewed and verified by Deloitte.
The KRG acknowledges the positive feedback received from domestic and international stakeholders. The council reiterates its commitment to the people of Kurdistan that Deloitte will continue to independently review and verify the statistics of the Kurdistan Region’s oil and gas sector.
A frequently asked questions handbook (also available in Kurdish, English and Arabic) has also been developed to help readers to understand the report’s contents.
The Prime Minister of the Kurdistan Regional Government (KRG), Masrour Barzani, on Saturday met Baroness Emma Nicholson, President of the Iraq Britain Business Council (IBBC).
Prime Minister Barzani highlighted the reforms of the ninth cabinet, its bid to diversify the economy and crucially to make the Kurdistan Region a focal point for business.
Baroness Nicholson gave a briefing on the council’s work, especially its last conference which was held in Dubai and which concentrated on developing UK, Iraq, and Kurdistan Region trade relations.
DNO ASA, the Norwegian oil and gas operator, today reported third quarter revenues of USD 253 million, a 38 percent quarter-on-quarter increase driven by higher North Sea sales and strengthening commodity prices.
The Company’s operating profit climbed seven percent to USD 65 million, weighed down by non-cash net impairments of USD 40 million primarily related to revised Ula area cost and production profiles in the North Sea.
Cash flow from operating activities totaled USD 163 million in the third quarter. Net debt was reduced by USD 36 million to USD 360 million, the lowest level since 2018.
“Like much of the rest of our resilient industry, we are recovering rapidly from the early ravaging of the oil and gas markets by the runaway pandemic,” said DNO’s Executive Chairman Bijan Mossavar-Rahmani. “We are back delivering value to our host countries, shareholders and other partners in an efficient and responsible manner,” he added.
Gross operated production at the Company’s flagship Tawke license in Kurdistan averaged 105,200 barrels of oil per day (bopd) in the third quarter, of which the Peshkabir field contributed 59,900 bopd and the Tawke field 45,300 bopd. Of the total, 78,900 bopd were net to DNO. In the North Sea, net production averaged 13,100 barrels of oil equivalent per day (boepd), bringing the Company’s total third quarter net production to 92,000 boepd.
DNO’s USD 110 million Peshkabir-Tawke gas project, which was commissioned in mid-2020, has injected eight billion cubic feet of otherwise flared gas through the end of the third quarter, capturing 480,000 tonnes of CO2 equivalent. In September, the Company initiated a USD 25 million second phase of the gas capture project to reinject and retain gas in the Tawke reservoir and avoid flaring. Having already eliminated routine venting of methane in operations in 2019, DNO recently launched a leak detection and repair initiative to measure, monitor and mitigate fugitive methane emissions.
Elsewhere in Kurdistan, commerciality was declared on the DNO-operated Baeshiqa license and plans submitted for a fast-track development.
DNO’s active North Sea exploration program notched up a success in the third quarter with appraisal drilling on the 2020 Bergknapp discovery (DNO 30 percent) resulting in a 35 percent upgrade of DNO’s recoverable resource estimate. Also during the quarter, DNO made an oil discovery on the Gomez prospect (DNO 65 percent and operator). Due to uncertainty of producibility, no estimate of recoverable volumes has been established pending further analysis. Another third quarter 2021 appraisal well, Black Vulture (DNO 32 percent), was dry. Following the end of the quarter, the Mugnetind exploration well (DNO 30 percent) encountered limited hydrocarbons and is unlikely to be commercial.
The Brasse development (DNO 50 percent and operator) is on track for a 2022 project sanction with DNO recently entering into a strategic framework agreement with Technip FMC covering subsea deliveries (SURF and SPS).
During the third quarter, the Company completed the placement of USD 400 million of new five-year senior unsecured bonds with at a coupon rate of 7.875 percent, lowering DNO’s average interest rate on its debt while extending the maturity profile.
A videoconference call with executive management will follow today at 15:00 (CET). Please visit www.dno.no to access the call.
ShaMaran Petroleum has announce that the Atrush block in Iraqi Kurdistan has surpassed the cumulative oil production milestone of 50 million barrels since its first oil in July 2017.
Dr. Adel Chaouch, President and Chief Executive Officer of ShaMaran, commented:
“This significant operational achievement is noteworthy as the production milestone has been achieved notwithstanding 2020’s significantly reduced development program due to the global pandemic and collapse of world crude oil prices.
“This demonstrates that the Atrush joint venture has the ability to successfully navigate through the Kurdistan oil industry’s difficult as well as good times.“
Pearl Petroleum, the consortium led by Dana Gas and Crescent Petroleum of the UAE, has signed a $250 million financing agreement with the U.S. International Development Finance Corporation (DFC) to support the gas expansion works currently under way at the Khor Mor gas plant in the Kurdistan Region of Iraq (KRI).
DFC is the development finance arm of the U.S government and proceeds from the 7-year DFC financing will support an increase in gas production capacity by 50% to 690 million standard cubic feet (scf)/day to meet rising demand for clean natural gas for electricity generation and industry in the KRI. The total project cost is $630 million and the remaining financing has already been secured through a regional bank facility and the EPC contractor.
The KM-250 project is the first stage of a two-train expansion project at Khor Mor that aims to boost total production capacity to approach 1 billion scf/day. Work resumed in April 2021 after onsite construction was halted last year due to the COVID pandemic and is currently on track for completion by April 2023.
Total investment by Pearl Petroleum at Khor Mor to date exceeds US$2.1 billion with total cumulative production of over 341 million barrels of oil equivalent (boe) in natural gas and liquids. The uninterrupted supply of gas to power plants in Erbil, Chemchemal and Bazian has resulted in significant fuel cost savings and economic benefits for the Kurdistan Region and Iraq as a whole.
The gas produced to date has enabled emissions savings of 42 million tonnes of CO2 by displacing diesel fuel in power generation in the KRI, thereby making a major contribution to reducing greenhouse gas emissions and local air pollution in the region as well as supporting the transition to better energy sources to tackle global climate change.
Between 2018 and 2021, the Khor Mor Gas Plant also benefitted from a 45% production increase through an optimization of the facility bringing current total production to 106,000 barrels of oil equivalent per day (boepd). The project is today the largest regional private sector upstream gas operation in Iraq.
Mr. Majid Jafar (pictured), CEO of Crescent Petroleum and Board Managing Director of Dana Gas, commented:
“This financing agreement with DFC underscores the importance of developing the natural gas resources in the KRI to support regional economic development and growth. Despite the global challenges presented by the COVID pandemic, we have continued to maintain our record of uninterrupted operations and even managed to grow production. The DFC agreement is a testament to our successful track record and further highlights the potential of these resources and the bright future for the KRI.”
Dr. Patrick Allman-Ward, CEO of Dana Gas, added:
“With our partners in Pearl Petroleum we are proud to be further developing the gas sector of the Kurdistan Region of Iraq, delivering expanded supply of cleaner energy, and supporting local economic development. This agreement underscores our continued confidence in the region and its long-term prospects.”
Mr. Dev Jagadesan, Acting CEO of DFC, said:
“DFC’s investment in the Khor Mor expansion will substantially increase access to energy for people all across the Kurdistan Region of Iraq. This highly developmental project represents the United States’ continuing investment in the KRI.”
In April 2007, Dana Gas and Crescent Petroleum entered into an agreement with the KRG for exclusive rights to appraise, develop, produce, market, and sell petroleum from the Khor Mor and Chemchemal fields in the KRI. Production from a newly built plant at Khor Mor began just 15 months later, in October 2008, an industry record. In 2009, Pearl Petroleum was formed as a consortium with Dana Gas and Crescent Petroleum as the majority shareholders, and with OMV, MOL, and RWE joining the consortium subsequently with a 10% share each.
Full-time staff at the operation number over 500, with over 85% local staff, including many in senior management positions. The companies have implemented a corporate social responsibility program to support local communities with equipment and supplies to deal with the COVID pandemic such as ventilators, sanitizers and protection equipment, in addition to a pledge to donate 100,000 vaccines to be administered in those local communities. This is in addition to ongoing support with local education, health and power supply as well as humanitarian aid for persons displaced from conflict zones as well as orphans. These initiatives assist the local communities in improving their standard of living, health, well-being, security and stability and the development of human capital.
Shares in Gulf Keystone Petroleum (GKP), a leading independent operator and producer in the Kurdistan Region of Iraq, were trading 12 percent higher today after the company announced its results for the half year ended 30 June 2021.
Jon Harris (pictured), Gulf Keystone’s Chief Executive Officer, said:
“I am pleased to report strong operational and financial performance in the first half of 2021, despite the continuing challenges of the COVID-19 pandemic. Our leverage to the recovery in oil prices, combined with safe and reliable production towards the top end of our guidance range and a continued sharp focus on costs, has resulted in significant cash flow generation. With continued strong production performance from the Shaikan Field, we are tightening the 2021 production guidance range to 42,000 – 44,000 bopd.
“We continue to deliver against our commitment to balance investment in growth and returns to shareholders. Today, we are pleased to declare an interim dividend for 2021 of $50 million, bringing total dividends this year to $100 million.
“The early restart of the drilling campaign in June enables us to maintain production growth momentum and to drill an additional well, SH-G, in 2021 after completion of SH-14, the final well in the 55,000 bopd investment programme. SH-14 is expected to come onstream in Q4 2021, while we expect SH-G to come onstream in Q1 2022.
“We continue to work closely with the MNR and our partner on the preparation of the Shaikan FDP and expect to submit the FDP to the MNR in Q4 2021 for approval.“
Highlights to 30 June 2021 and post reporting period
Operational
Remain focused on safe and reliable operations with No Lost Time Incident (“LTI”) recorded for over 600 days and no recordable incidents for around 550 days
Continuing to manage the challenges presented by COVID-19 to protect the health of staff and contractors
Strong average gross 2021 production to 31 August 2021 of c.42,900 bopd, up 18% from the corresponding period in 2020 and towards the top end of 2021 guidance; gross production on 31 August 2021 was 42,842 bopd
Drilling activities progressing well following early restart in June; SH-13 expected to come onstream imminently; drilling of SH-14 underway with completion and hook-up expected in Q4 2021
Capitalising on early restart of drilling and opportunity to maintain a continuous drilling programme, planning to spud SH-G in Q4 2021, after completion of SH-14. SH-G is expected to commence production in Q1 2022
SH-G, the first well after the 55,000 bopd expansion programme, is an opportunity to maintain growth and momentum while we prepare the Shaikan Field Development Plan (“FDP”)
Completed debottlenecking of PF-2, increasing total field processing capacity to c.57,500 bopd
Financial
H1 2021 revenue up 162% to $130.7 million (H1 2020: $49.9m) contributing to a return to profit after tax of $64.8 million (H1 2020: $33.1 million loss)
Adjusted H1 2021 EBITDA of $93.8 million, more than triple $27.5 million in H1 2020, driven by the Company’s strong leverage to the recovery in oil prices, increase in production and low-cost base:
Realised price up 129% to $43.7/bbl (H1 2020: $19.1/bbl)
H1 2021 gross average production up 17% to 43,516 bopd (H1 2020: 37,159 bopd)
H1 2021 gross Opex per barrel of $2.4/bbl, below 2021 guidance range of $2.5-$2.9/bbl
Net Capex of $14.1 million (H1 2020: $38.5 million), with the restart of the 55,000 bopd expansion programme
Total dividends of $50 million paid to date, including an annual dividend of $25 million and a special dividend of $25 million
Robust cash balance of $177.4 million at 1 September 2021
Outlook
Tightening 2021 average gross production guidance range from 40,000 – 44,000 bopd to 42,000 – 44,000 bopd
Maintaining 2021 gross Opex per barrel guidance of $2.5 to $2.9/bbl
The addition of SH-G increases 2021 net Capex guidance from $55-$65 million to $75-$85 million
With continued constructive engagement with the Ministry of Natural Resources (“MNR”) and the Company’s partner Kalegran B.V. (a subsidiary of MOL Hungarian Oil & Gas plc) (“MOL”), Gulf Keystone is expecting to submit an FDP in Q4 2021 to the MNR for approval
The FDP includes the continued ramp-up of Jurassic oil production, appraisal of the Triassic reservoir and a Gas Management Plan
We continue to optimise the scope, schedule and cost of the FDP
Developing Gulf Keystone’s sustainability strategy, with the primary environmental focus on more than halving CO2 per barrel by 2025 by eliminating flaring
In line with the Company’s strategy of balancing investment in growth and returns to shareholders, Gulf Keystone is pleased to declare an interim dividend for 2021. The 2021 interim dividend is $50 million to be paid on 8 October 2021 based on a record date of 24 September 2021
Following payment of the interim dividend, the Company will have distributed $100 million of dividends in 2021
With continuing strong oil prices and cash flow generation, there may be opportunities to consider further distributions to shareholders and to optimise the capital structure
Shares in Genel Energy fell more than 15 percent in mid-morning trading after the company announced that the Kurdistan Regional Government (KRG) intends to terminate its contracts at Bina Bawi and Miran.
In a statement, the company said:
“Genel has received notice from the Ministry of Natural Resources of the Kurdistan Regional Government (‘KRG’) of its intention to terminate the Bina Bawi and Miran PSCs.
“Genel believes that the KRG has no grounds for issuing its notices of intention to terminate.
“Genel wishes to continue operations under the PSCs and to work with the KRG on the development of these fields. However, Genel will take steps to protect its rights under the PSCs and, if necessary, seek compensation, including for its material investment. As a first step, Genel intends to issue notice of dispute to the KRG under each PSC, contesting the right of the KRG to issue any such termination notice and, in doing so, trigger an obligation to hold good faith negotiations to resolve this matter promptly and without the need for either party to refer the matter to international arbitration.
“As stated at our half-year results, Genel has found it difficult to engage the KRG under the PSCs to obtain the necessary approvals to proceed with the development of the assets, and every effort has been made to obtain these so that the projects can be progressed. Genel had earlier reached a commercial understanding with the KRG in September 2019 to develop the fields using a staged and integrated oil and gas development concept. In the course of those negotiations leading to updated terms of the parties’ agreements, the KRG confirmed to Genel that it would not serve notice of intention to terminate the PSCs while these negotiations remain ongoing. Genel has subsequently prepared and submitted proposals to the KRG, which honoured the terms agreed in September 2019, each of which would have resulted in the progression of development of the assets.“
Young female entrepreneur strives to transform the medical sector in the Kurdistan Region of Iraq
Twenty-five-year-old Nasreen Hassan has been working for years on a business idea that will help hospitals and medical centres in the Kurdistan Region of Iraq improve and maintain their medical equipment.
Having witnessed years of conflict, Nasreen says that she wants to do her part in saving and improving the lives of women, men and children, especially in light of the current worldwide pandemic. “The number of weapons and rockets outnumber medical equipment,” said Nasreen. “And I want to correct this.”
“Just think about what will make the world better, not only for you, but for everyone around you,” said Nasreen. “For me, I want to produce, install and provide maintenance for medical machinery locally. This will help create jobs for young people and open new opportunities for many.”
“But most importantly, it will save and improve lives.”
Unable to pursue a degree in medical engineering, the IT graduate recently joined the ILO’s Start Your Business (SYB) training programme in Iraq, aimed at giving her the knowledge and tools needed to set up her business.
Start Your Business is part of the wider Start and Improve Your Business (SIYB) training package designed to respond to the progressive stages of business development. The training in Iraq aims to support young refugees, internally displaced people, and vulnerable host community members who are interested in setting up their own small businesses or improving existing ones.
“The most beneficial part of the training was the business plan, even though I already had some knowledge on the subject, but not in such detail or depth,” said Nasreen. “From the first day of the training with the ILO, I have been working on my business plan, one step at a time. I have been revising it and adding new ideas on the way, because the more we moved forward with the training, the more our ideas expanded, reflecting the reality more and more.”
The training is part of efforts being implemented by the ILO under the “Partnership for improving prospects for forcibly displaced persons and host communities,” also known as PROSPECTS , a multi-agency programme supported by the Government of the Netherlands.
For the ILO one of the key areas of focus of PROSPECTS in Iraq is to support youth to transition from learning and skills development to decent work, through a range of wage employment and self-employment interventions, in collaboration with other PROSPECTS partners, including UNICEF.
This includes training trainers from different organizations on ILO’s training package, including banks and microfinance institutions, trainers from UNICEF-supported youth centres, and local NGOs supporting Small and Medium Enterprises. It also involves referring youth (including Nasreen who recently received life skills training through ACTED at a UNICEF-supported youth centre) to the ILO for further support.
The programme will also link some of the trained youth with access to affordable financial services, to help them start up their businesses and establish a decent livelihood. This is part of an initiative implemented in partnership with the Central Bank of Iraq that was launched in March 2021.
For Nasreen, there are many hurdles to overcome and training opportunities to pursue. Yet despite the long journey ahead, she is determined to see her business plan come to life.
“I need financial support and I need more training, which will help me reach a stage where I have the technical know-how on establishing my business, even if it takes twenty years,” said Nasreen. “I would like to say to other young people in my position that they should also pursue their goals; whether in terms of studying or employment. Don’t let anything get in your way.”
PROSPECTS is a strategic four-year global partnership that supports host communities and displaced populations in eight countries across East and North Africa and the Arab States and which also includes the International Finance Corporation (IFC), the World Bank (WB) and the United Nations High Commissioner for Refugees (UNHCR).
DNO ASA, the Norwegian oil and gas operator, today announced that the Kurdistan Regional Government has approved the Company’s acquisition of ExxonMobil‘s remaining 32 percent interest in the Baeshiqa license, doubling DNO’s stake.
In parallel, commerciality has been declared on the license with plans submitted for fast-track development including early production from previously drilled but suspended wells.
DNO has already demonstrated proof of concept of producing these wells through temporary test facilities, having trucked some 15,000 barrels of 40 degree API and 22 degree API oil for export in 2019 and 2020 from the Baeshiqa-2 and Zartik-1 discovery wells.
Following the transaction, the joint venture comprises DNO as operator with a 64 percent (80 percent paying) interest, the Turkish Energy Company (TEC) with a 16 percent (20 percent paying) interest and the Kurdistan Regional Government with a 20 percent carried interest.
“This acquisition and plans for fast-track development underscore our belief in the potential of the Baeshiqa license and more broadly our long-term commitment to Kurdistan.
“Once we get the green light from the authorities to proceed, first production will be a matter of months rather than years.“
DNO’s 3,204 meters discovery well, Baeshiqa-2, tested hydrocarbons to surface from multiple stacked Jurassic and Triassic zones. Two zones flowed naturally at rates averaging over 3,000 barrels of oil per day (bopd) of light gravity oil each and another averaged over 1,000 bopd also of light gravity oil. DNO drilled Zartik-1, the second discovery well, 16 kilometers to the southeast of Baeshiqa-2, to a depth of 3,021 meters. This well tested hydrocarbons to surface from several Jurassic zones, with one zone flowing naturally at rates averaging 2,000 bopd of medium gravity oil.
DNO acquired its first 32 percent interest and assumed operatorship of the Baeshiqa license from ExxonMobil in 2018. As consideration for both acquisitions DNO has covered ExxonMobil’s share of exploration costs since January 2019 and the seller will receive payment of USD 15 million.
In addition to the 327-square kilometer Baeshiqa license, DNO operates the Tawke license containing the Tawke and Peshkabir fields in Kurdistan. Combined production from these fields averaged 110,300 bopd in the second quarter of 2021.
