Category: Oil News

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Former CEO of GKP Jailed for Tax Evasion

By John Lee.

A US court has sentenced the former CEO of Gulf Keystone Petroleum (GKP) to five years in prison for tax evasion.

According to a statement from the US Department of Justice, Todd Kozel used offshore structures, trusts, and bank accounts to conceal a portion of his undeclared income from the U.S. government.

In addition to the prison sentence, Kozel, was sentenced to two years of supervised release and ordered to pay restitution to the IRS in the amount of $29,462,965.23.

The full text of the court statement follows:

Co-Founder And Former CEO Of Foreign Oil Company Sentenced To 60 Months In Prison For Failure To File Tax Returns Causing Over $20 Million In Losses To The U.S. Treasury Damian Williams, United States Attorney for the Southern District of New York, and Thomas Fattorusso, the Special Agent-in-Charge of the New York Field Office of the Internal Revenue Service, Criminal Investigation (“IRS-CI”), announced today that TODD KOZEL, the former Chief Executive Officer (“CEO”) of a multi-national foreign oil company, was sentenced in Manhattan federal court to 60 months in prison following KOZEL’s guilty plea to five counts of willful failure to file individual income tax returns for the calendar years 2011 through 2015.  U.S. District Judge Kimba M. Wood, who previously accepted Kozel’s guilty plea, imposed today’s sentence.

U.S. Attorney Damian Williams said:  “For years, Todd Kozel failed to file income tax returns, or pay the federal tax liabilities that were owed under those returns, despite earning millions of dollars in compensation as the CEO of an overseas oil company.  Today’s sentence shows that no one is above the law-all citizens must pay their fair share of taxes, including Americans who earn compensation from working in foreign countries.”

IRS Criminal Investigation Special Agent-in-Charge Tom Fattorusso said:  “U.S. citizens are required to pay taxes on worldwide income from all sources, including income earned overseas. Kozel earned tens of millions of dollars, and as a result, was required by law to pay taxes – more than $20 million – on those earnings. By not paying his fair share, he cheated the American people out of millions of dollars.”

According to the Information and other documents filed in the case, as well as statements made during public court proceedings:

Pursuant to the Internal Revenue Code and attendant regulations, all United States citizens and residents who had annual income in excess of a threshold amount are required to report accurately their income, tax obligations, and, where appropriate, any claim for a refund on a United States Individual Income Tax Return, Form 1040 (“Form 1040”), which must be filed annually with the Internal Revenue Service (“IRS”).  This obligation applies to all sources of income, including income earned through overseas employment and from foreign financial accounts.

From at least in or about 2004 through at least in or about 2014, TODD KOZEL was the co-founder and CEO of a London-based petroleum company with operations in the Kurdistan Region of Iraq (the “Oil Company”).  During the period 2011 through 2015, KOZEL, a United States citizen, earned substantial compensation as the CEO of the Oil Company, totaling more than approximately $66 million during the five-year period.  But despite earning this substantial income, KOZEL willfully failed timely to file any personal federal income tax returns for calendar years 2011 through 2015, resulting in well over $20 million in unpaid federal tax liabilities.  As part of his criminal conduct, KOZEL used sophisticated offshore structures, trusts, and bank accounts to conceal a portion of his undeclared income from the U.S. government.

*                *                *

In addition to the prison sentence, KOZEL, 55, of New York, New York, was sentenced to two years of supervised release and ordered to pay restitution to the IRS in the amount of $29,462,965.23.

Mr. Williams praised the IRS-CI for their outstanding investigative work on this case, and thanked the Large Business and International Division of the IRS for its assistance.

This case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant United States Attorneys Louis A. Pellegrino and Olga I. Zverovich are in charge of the prosecution.

(Source: US Department of Justice)

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Iraq-Jordan Oil Pipeline: Financially Costly, Contractually Complex

By Ahmed Mousa Jiyad.

Any opinions expressed are those of the author, and do not necessarily reflect the views of Iraq Business News.

Iraq-Jordan Oil Pipeline — Financially Costly, Contractually Complex

Since 1983 the Basra-Aqaba, or Iraq-Jordan, oil pipeline (IJOP) has been on and off the screen of the bilateral relation between the two countries.

And from 2011 to date, every Iraqi government had “approved a frame-agreement” relating to the same pipeline, but none of these agreements was published and, thus, nothing known about the terms of these, so claimed, approved agreements!

Scope of the pipeline, route, length, funding, execution, duration and cost have been on a changing course since 2011, but the most dramatic change is the staggering cost, which reportedly, increased from $3 billion to $26 billion between 2016 and 2022!

No surprise, therefore, that this pipeline has been viewed diametrically differently and with absence of full transparency, on the part of the Ministry of Oil (MoO) and its affiliate SCOP, the feasibility of this project remains a pure intelligent guessing.

This article addresses first the different views and what prompted them by recent development and information on the pipeline, then in part two calculates the barrel-cost corresponding to actual pipeline utilization.

Part three examines the re-export options in the comparative, and part four provides cautionary notes on the limitation of cash flow analysis for such a project.

Moving from the quantitative mode to real life environment, part five debates strategic considerations, geopolitical vulnerability and security risks and that is complemented, in part six, by highlighting and identifying the needed contractual and legal modalities; then the article ends with concluding remarks.

Click here to download the full report in pdf format.

Mr Jiyad is an independent development consultant, scholar and Associate with the former Centre for Global Energy Studies (CGES), London. He was formerly a senior economist with the Iraq National Oil Company and Iraq’s Ministry of Oil, Chief Expert for the Council of Ministers, Director at the Ministry of Trade, and International Specialist with UN organizations in Uganda, Sudan and Jordan. He is now based in Norway (Email: mou-jiya(at)online.no, Skype ID: Ahmed Mousa Jiyad). Read more of Mr Jiyad’s biography here.

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Iraqi Drilling Company visits SOCAR AQS

By John Lee.

The General Director of Azerbaijan-based oil services company SOCAR AQS, Samir Mollayev, met with a delegation led by General Director of Iraqi Drilling Company (IDC), Basim Abdulkareem, on Tuesday.

At the meeting held in Socar’s Baku office, he informed the guests about the development of the oil and gas industry in Azerbaijan, and the drilling projects implemented by the company.

As part of the visit, the delegation visited the production and supply bases of the company, as well as the Baku Drilling School, an internationally accredited training centre established by SOCAR AQS.

(Source: SOCAR AQS)

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Chinese Consortium wins $594m Iraq Oil Processing Contract

By John Lee.

Kuwait Energy Basra Limited (KE Basra), an indirect wholly-owned subsidiary of Hong Kong-based United Energy Group (UEG), has entered into the EPCC (engineering, procurement, construction and commissioning) contract with a Chinese consortium to provide a central processing facility including oil treatment system and auxiliary systems at Block 9 in Basra.

The contractor is a consortium formed on 31 December 2020 and consisting of China CAMC Engineering and CNOOC Petrochemical Engineering.

According to disclosure documents lodged with the Stock Exchange of Hong Kong, the contract price is US$593,584,975 and the work should be completed within 33 months from the date of commencement. (The foundation stone for the project has just been laid).

The main purpose of this central processing facility project is to increase crude oil production capacity of Block 9 to 100,000 barrels per day (bpd).

In its statement to the Hong Kong Stock Exchange, UEG added:

“Kuwait Energy Basra Limited is a limited liability company incorporated in British Virgin Islands and an indirect wholly-owned subsidiary of the Company.

“KE Basra is the operator of the Block 9 contract area located in the Basra Governorate, Southern Iraq, pursuant to the Exploration, Development and Production Service Contract with the contracting parties of Basra Oil Company (an Iraqi State Oil Company), KE Basra, Dragon Oil (Block 9) Limited and Egyptian General Petroleum Corporation.“

(Source: UEG)

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Aggreko completes Flare-Gas-to-Power plant in KRI

UK-based Aggreko has announced that it has completed commissioning of the largest flare-gas-to-power project in the Middle East to date at 165 MW capacity.

The plant is situated nearby the Saqala [Sarqala] Field, Garmain block, South East Kurdistan.

The 165 MW modular power plant has run at full capacity for 72 hours in the project’s final site acceptance test (SAT), marking successful on-time, on-budget delivery.

The plant is run on approximately 40 million square cubic feet (SCF) per day of associated petroleum gas (APG) from the Saqala Field, saving 840 tonnes of CO2 per day, and cutting flaring by a third.

Delivered over the course of 2020-2021 against the backdrop of the pandemic, the project was conceived and executed in close collaboration with Kurdistan’s Ministry of National Resources (MNR) and Ministry of Electricity (MOE).

Aggreko also delivered a new 6km gathering pipeline to transport the APG to the power plant, and upgraded 7km of 33 kV and 33km of 132 kV overhead cables to new high tensile low sage (HTLS) conductors in order for the local distribution grid to handle the new power plant’s full output.

Ahmed Mufti, Kurdistan Regional Government’s Deputy Minister of Natural Resources (MNR) said:

“We worked with Aggreko to provide a creative solution to convert flare gas to power in a way that directly benefits the local population and the regional in general, while creating a positive environmental impact and improving air quality.”

Phil Burns, Managing Director for Aggreko Middle East, comments:

“Kurdistan’s Regional Government has been forward-thinking in looking for ways to capture and convert gas that would otherwise be flared, to unlock production and power the local economy. We are extremely proud to have worked with the Ministries to deliver the Middle East’s largest flare gas to power project to date, while upgrading the local infrastructure to the lasting benefit of the community and businesses it serves.”

The project is now contracted to run for four years, delivering power 24/7/365.

Built using 192 MW of modular gas generators, the plant can easily be scaled up or down in response to changing gas volumes.

Approximately 60 Aggreko engineers have delivered the project, with 80 local jobs created directly and indirectly for the site’s delivery and ongoing operation, including 44 local nationals who have already commenced Aggreko’s official training scheme.

More here.

(Source: Aggreko)

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Work Starts at $594m Oil Processing Plant at Block 9

By John Lee.

The President of  the Iraqi National Oil Company (INOC) has laid the foundation stone for the $594-million crude oil processing plant at Block 9, within the Al-Fayha Oil Field in Basra Province.

Ihsan Abdul-Jabbar Ismail said that the development is important for the production of light oil, with a target for this project of up to 100,000 barrels of crude oil per day, along with 135 mmscfd of gas at a future stage for electricity production.

Khaled Hamza, General Manager of Basra Oil Company (BOC), said the development of the field was started in 2014 by Kuwait Energy Company (KEC) and continued by the Chinese company UEG [United Energy Group] which acquired KEC, and that the first exploration well was drilled and the results were encouraging.

He stressed that the oil produced from the exploration Block 9 is one of the best types of oil globally.

The CEO of UEG, Sonk Yu [Song Yu, Chief Operation Officer??], said that laying the foundation stone for the development was an important moment for the company.

(Sources: Ministry of Oil, UEG)

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GKP declares Divi and gives Update

Gulf Keystone has provided an operational and corporate update:

Jon Harris (pictured), Gulf Keystone’s Chief Executive Officer, said:

“We are pleased today to declare an additional interim dividend of $50 million, bringing distributions over the past eight months to $150 million in line with our commitment to balance investment in growth with returns to shareholders.

“Since the beginning of 2022, gross production peaked at just over 50,000 bopd and has averaged c.46,800 bopd, versus the 2021 average of 43,440 bopd. However, the lower productivity of recently completed wells, SH-13 and SH-14, and temporarily curtailed production from SH-12, have resulted in a delay in gross production increasing to 55,000 bopd. 2022 gross average production is expected to be 44,000 to 50,000 bopd.

“GKP’s substantial production base at current oil prices continues to generate significant cash flow and value for Gulf Keystone’s stakeholders. On approval of our recently submitted Field Development Plan, we are well positioned to achieve sustainable growth from the Shaikan Field, which has delivered close to 100 MMstb, and has 489 MMstb of estimated 2P gross reserves remaining.“

Operational 

  • Continued strong focus on safety in 2021 despite one previously reported lost time incident (“LTI”); currently no LTIs recorded for over 90 days 
  • Gross average production for 2021 of 43,440 bopd, at the upper end of guidance range; gross average production in 2022 year to date of c.46,800 bopd
  • Drilling of SH-15 progressing well; continue to expect start-up in Q2 2022
  • Due to well productivity, the increase in gross production towards 55,000 bopd has been delayed
    • SH-13 & SH-14
      • Following completion of the acid stimulation programme on SH-13, and the clean-up of SH-14, both wells were brought on stream in December 2021 and their productivity has been below  expectations
      • An acid stimulation programme for SH-14 is currently ongoing
    • SH-12
      • Following the early appearance of trace quantities of water, production from the well has been temporarily curtailed, in line with the Company’s prudent reservoir management strategy . The Company is investigating options to maximise near-term production from the well
      • Water ingress is common in fractured carbonate reservoirs like the Shaikan Field. Gulf Keystone has historically experienced trace amounts of water in a few other wells and has been successfully optimising their production levels. The Company continues to expedite plans to add water handling to further optimise production
  • The Company does not expect any material impact on reserves or medium-term production potential. Considering cumulative gross production of c.99 MMstb, 2P gross reserves are estimated to be 489 MMstb at 31 December 2021, based on the 2020 Competent Person’s Report adjusted for 2021 production

Financial

  • Following $100m of dividends distributed in 2021, Gulf Keystone is pleased to announce that the Board has approved the declaration of an additional interim dividend of $50 million, equivalent to 23.394 US cents per Common Share of the Company
  • The interim dividend is expected to be paid on 25 February 2022, based on a record date of 11 February 2022. The Company will disclose the pounds sterling rate per share prior to the ex-dividend date of 10 February 2022
  • $283.2 million ($221.7 million net to GKP) received from the Kurdistan Regional Government in 2021 for payments of crude oil sales and recovery of outstanding arrears, with an additional $89.0 million ($69.7 million net to GKP) received in January 2022 for the combined September 2021 and October 2021 crude oil sales and arrears payments
  • The current outstanding arrears balance is $28.6 million net to GKP related to the January and February 2020 invoices
  • Robust balance sheet, with a cash balance of $228 million as at 21 January 2022

Outlook

  • The Company expects gross average production for 2022 of 44,000 to 50,000 bopd, reflecting the anticipated production contribution from SH-15 and benefits of well workover activities
  • Gulf Keystone continues to engage with the Ministry of Natural Resources (“MNR”) following the submission of a draft FDP in 2021. The Company will revert to the market at an appropriate time with details on the FDP and updated production guidance
  • 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

(Source: GKP)

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Deal Signed to Develop Iraq’s Mansuriya Gas Field

By John Lee.

The Chinese company Sinopec (China Petroleum & Chemical Corporation) has signed a deal to develop the Mansuriyah gas field in Diyala.

The field, near the Iranian border, is expected to produce 300 million standard cubic feet (Mmscf) per day of gas, which will be used for electricity generation and “various industrial projects“.

With an area of 150 km2 and gas reserves estimated at 4.5 trillion standard cubic feet, Mansuriyah is the second largest gas field in Iraq, after the Akkas field in Anbar Province.

Sinopec will have a 49-percent interest in the field, with Iraq’s state-owned Midland [Middle, Central] Oil Company having 51 percent.

Previous information suggested that the contract will run for 25 years, and may be extended for an additional five years.

In 2010, an agreement had been signed for the field to be developed by Turkish Petroleum (TPAO) (37.5%), Iraqi Oil Exploration Company (25%), Kuwait Energy (KEC) (22.5%), and Kogas (15%). This consortium stopped development in 2014 due to security concerns, and the agreement was reportedly cancelled in 2020.

The signing follows the initial announcement of the award in April 2021. At the ceremony, the Minister for Oil clarified that the “final” contract will need to be signed by the next government.

(Source: Ministry of Oil)

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Video: Pipeline Explosion appears caused by Falling Pylon

By John Lee.

Australia’s SBS News has published CCTV footage purporting to show the explosion that temporarily closed the Kirkuk-Ceyhan pipeline earlier this week.

It appears to show an electricity pylon falling on the pipeline.

According to Kurdish news agency Rudaw, a group affiliated with the Kurdistan Workers’ Party (PKK) had claimed responsibility for the attack.

Click here to view.

(Sources: SBS News, Rudaw)

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French Oil Consultancy Wins Iraq Contract

By John Lee.

French-based petroleum consultancy Beicip Franlab has signed a deal to provide consultancy services to the Iraqi Oil Ministry’s Reservoirs & Fields Development Directorate.

The Minister of Oil and President of Iraqi National Oil Company (INOC), Ihsan Abdul-Jabbar Ismail, said that Franlab will give advice that can be used to develop the oil sector, stating that the contract will help the Ministry of Oil and the oil companies to make the right decisions to develop the oil reservoirs in the interest of the national economy and the development of the oil and gas industry in the country.

The French ambassador to Baghdad, Eric Chevalier, said the signing marks a new stage in the development of relations with Iraq in the field of oil, gas and energy.

The Representative of Beicip Franlab, Thierry Le Maux, said the deal will help extend the life of the oil and gas fields.

(Source: Ministry of Oil)

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